Are you planning to get a vehicle? Two types of loans are available for you to finance a car. One is a new car, and another is a used car loan. The used car loans are specifically made for those not opting for a brand-new car for any reason.
Most people settle for second-hand cars for various reasons. While cost might be the first factor, other factors might affect the decision to get a brand new or a second-hand car, including fear of getting the car damaged. Many people choose to get an old car to practice driving before getting a new one. In any case, if you need a loan to get a second-hand car, here are some reasons why you should go for a used car loan:
# Loan Type
Since the used car loan is specially designed for second-hand car purchases, these loans might be the best fit for the purpose. Generally, a car’s prices, down payment, insurance, and other aspects highly differ between new and old cars. Thus, when a loan is specially curated for that specific type of car, it covers all the necessities and helps you to get what you need.
If you plan to get a second-hand car, a new car loan will not help you with the immediate requirements.
# Repayment Term
The repayment terms of a new and used car loan also vary. The repayment term means the tenure by which you must complete the repayment of the entire loan amount. It is better to have a more extended repayment option since the longer it gets, the lesser the interest rates are. However, paying instalments for an extended period can cost you more. Since used car loans have a shorter tenure, it helps you to repay the loan without much of a hassle flexibly.
# Loan Amount
Any new car would cost a lot more than a used car. Thus, getting a loan for a used car is the best option if you are doing the same. Loans tend to have heavy interest rates; thus, getting a huge loan when you don’t need it will only increase your financial burden.
If you choose a loan for a used car, then the amount will be what you need to get a cheaper second-hand car. You can refrain from paying the interest rates when you do not need that much money.
# Down Payment
Generally, the down payment amount varies between new and used cars. Since the used car prices are lower than new cars, the down payment amount might be higher. Since the new car loan disbursal process is different, you might have to struggle to pay the down payment.
Muthoot Capital is one such loan provider that covers most of your down payment on specific car models. Although this offer is limited to only some models, you can still make the best by choosing a car model within that limit.
# Rate Of Applicable Interest
The interest rates are also different for new and used car loans. The interest rate on new car loans is much higher than the interest rate on used cars. While used car loans are available at as low as an 8.5% interest rate, new car loans can rate over 11%.
There is no point in getting a loan with higher interest rates when you opt for a product with a perfect loan option. Used car loans can save a lot of your money.
In other words, getting a loan for a used car offers you more flexibility than other new car loans. These loans have easy documentation, quick disbursals, and lower interest rates. The tenure for such loans is shorter, allowing the borrower to pay comfortably without paying much interest.
Second-hand cars are available at a great price all over India, and most of these cars are in excellent condition. So, if you are dreaming of your car but there is a financial crunch, the used car loans are there to help you out!