Improving your credit score and making a larger down payment are some of the ways to secure a favourable interest rate on your used car loan.
There may be a lot of value in choosing a good second-hand car over a new one. If you look hard enough, you could find a barely used car for a fraction of the price of a new one. However, a cost-effective alternative could still need a huge sum of money. This is where a used car loan can come in handy.
A used car loan can provide quick access to funds and help you spread the cost of your car into small monthly instalments. If you are planning to apply for such a loan, it is important to secure a loan with lower interest rates so that you can further enhance the cost-effectiveness of your purchase. With careful planning and strategic approaches, you can obtain a used car loan with lower interest rates, saving you money in the long run.
Here are four essential tips to help you secure lower interest rates on your used car loan.
1. Improve your credit score
One of the most important factors affecting the interest rate on any loan, including used car loans, is your credit score. Your credit score is used by the lender to assess your creditworthiness. If you have a higher credit score, you might get a used car loan at lower interest rates and better terms. This is because a higher credit score indicates a lower risk for the lender.
If you are planning to apply for a used car loan, it is important to review your credit report. If your credit score is low, you can take steps to improve it. In order to improve your credit score, you can focus on paying your existing debts such as credit card bills and other loan payments on time. This will eventually help you to improve your credit score, which will help in securing lower interest. Also, reviewing your credit report also helps in finding out if there is any error or inaccuracy that could negatively impact your score.
2. Shop around for the best rates: When it comes to securing a used car loan, it is important to research and compare loan options offered by multiple lenders. Each lender may offer different interest rates and loan terms based on your credit history, income, and the vehicle you intend to purchase. This process allows you to compare offers and negotiate more effectively. By exploring different options, you can identify the lender that provides the most favourable terms, including lower interest rates and flexible repayment options.
3. Make a larger down payment: Another effective strategy for securing lower interest rates on a used car loan is to make a larger down payment. A substantial down payment reduces the amount you need to borrow, which decreases the lender’s risk and may result in a lower interest rate. Save up for a significant down payment by setting aside a portion of your income specifically for this purpose. Aim to put down at least 20% of the car’s purchase price, if possible. Making a larger down payment can shorten the duration of your loan and reduce the total interest paid over the life of the loan.
4. Consider getting a co-applicant: If you have a limited credit history or a less-than-ideal credit score, enlisting the help of a co-signer can strengthen your loan application and potentially secure a lower interest rate. A co-applicant with a strong credit history and stable income can reassure lenders that the loan will be repaid, reducing their risk, and getting you better loan terms.
Bajaj Finance, one of the largest NBFCs in the country, offers used car loans that come with simple eligibility criteria and minimal paperwork. With a Bajaj Finserv Used Car Loan, you can get a high-value loan of up to Rs. 77 lakh and bring home the car of your choice with ease.
With flexible repayment options, competitive used car loan interest rates and quick disbursal, Bajaj Finance makes borrowing easy and convenient for you.
Securing a lower interest rate on a used car loan can save you money and make your vehicle purchase more affordable overall. By focusing on improving your credit score, shopping around for the best rates, making a larger down payment, and considering a co-signer if needed, you can enhance your chances of obtaining better loan terms. With careful planning and strategic decision-making, you can drive away in your dream car while keeping your finances in check.
