Here Are a Few Factors That Affect Used Car Loan Interest Rates

Posted by HeroFincorp on December 21st, 2020

Given the current pandemic situation, it is best to invest in a car that can make your everyday commute easy, and can keep you and your loved ones protected. In these tough times, it is logical to purchase a used car as it won’t cost you a fortune to offer the kind of comfort you desire. In addition, those dealing with money-related issues no longer have to worry about paying the entire amount of a used car in one go as today, there are various banks and financial institutions that offer used car loans.

However, you need to thoroughly scout the markets in order to select a lender who can offer low used car loan interest rates. The current rate on used car loans is somewhere between 9 to 17% as each lender offers a different rate and the rate may also differ based on factors such as your credit score, income, total loan amount and more. Most importantly, you must use an EMI calculator to see whether or not you will able to pay the monthly payment suggested by the lender.

Common factors that can affect the interest rate on used car loans

• Credit score – One of the most important factors that the financial institutes consider while offering you a loan is your credit score as it reflects the history of the loans you took in the past. Individuals with positive credit score are usually offered loans at low interest rates. Hence, you must maintain a good score as otherwise your application will be either rejected or the interest rate will be high.

• Debt-to-income ratio –Another point that determines your ability to repay the loan amount is your debt-to-income ratio. A high ratio is a clear indication that your monthly expenses are being run on the multiple loans taken by you and in this case, you are usually charged a high interest rate.

• The model of the car – It may sound surprising but the rate of interest also depends on the model and the age of your car. The used car loan interest rates are usually higher on older cars due to the risks associated with them and hence, you must opt for a car that is not too old. Also, in order to meet the eligibility criteria, the car you wish to buy must not be more than 8 years of age.

• Repayment period – Usually, if you select a longer repayment tenure, you are asked to pay a low interest rate. However, you must remember that with a shorter tenure, the interest might be high but the overall payment amount will be low. Moreover, with a shorter tenure, you can quickly get rid of the liability.

Conclusion
To wrap up, you can now easily purchase a car of your dreams by opting for a used car loan. In addition, there are numerous lenders who have made it absolutely convenient for you to avail a loan with low used car loan interest rates and flexible repayment terms. However, the above-mentioned points must be kept in mind in order to get a loan at a low interest rate.