Pre Approved Used Car Loan – Things to Remember Before Borrowing Money to Buy a Home / Money / Personal Finance / Used Car
Things to remember before borrowing money to buy a used car Read 2 minutes. Updated: 08 August 2020, 05:25 PM IST Tinesh Bhasin Premium
Pre Approved Used Car Loan
Interest rates on used car loans are higher (by 3-7%) than the rates offered by new car lenders. Photo: iStock
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Once the locks are lifted, the auto industry is expected to boost car sales. Most of these buyers are looking for a used car because they can use it for a limited time until the threat of the pandemic becomes greater.
One of the reasons people look for a used car is limited budget. “There is economic uncertainty. Buyers want a car, they have a limited budget. That’s why many people choose used cars instead of new cars,” said Neeraj Singh, CEO and founder of Spinny, a pre-owned car platform.
According to him, this is true for those without a vehicle, as well as those who have a car but need another for the mobility of other family members.
But financing your used car purchase can be confusing because interest rates are higher than what lenders offer for new cars (3-7%) and every lender looks at the parameters. “Interest rates on used car loans are generally higher compared to new car loans. This is because of the high risk of used cars. On the other hand, finance considers this form a bit risky. On the other hand, the history of the vehicle is very little known,” said Abhinav Kaul, Vice President, Strategic Partnerships, Bankbazaar.
Used Car Sales Rise Amid Big Price Gap
Manufacturers provide warranty on new cars, this is not the case with used cars. There is no clear indication of vehicle condition, accident to occur, condition of spare parts and engine etc. It is for these reasons that lenders consider a pre-owned car risky.
Factors like the type and age of the car matter when you go for a used car loan. “For example, the average lifespan of a car is considered to be 15 years. Most banks may not finance cars older than 8-10 years. In this case, the borrower does not exceed the same interval. So if you are buying a 5 year old car, your loan will not exceed 3 to 5 years. “On the other hand, most banks won’t finance more than three resales.”
In a used car, there may be other implications as well. Existing owners can have the remaining loan on the four-wheeler. In this case, the seller must first close the existing loan, obtain a no-objection certificate from the lender, remove the assumption from the Registration Certificate (RC) and obtain a new RC book without assumption before selling it. All this can take a lot of time.
If the buyer is willing to go through most of the procedures on their own or through an agent, instead of borrowing a used car, the best option is to look for alternatives. A top-up loan is an option if you have a home equity loan. The interest rate on a home loan is very cheap and the procedure is simple as compared to getting a loan for a pre-owned car.
How To Finance A Used Car
Lenders typically lend up to 75% of the used car’s value. If you choose to top up, you can finance the entire purchase. Consider a personal loan that offers an interest rate at least 1.5% lower than the used car loan rate.
Many used car platforms connect with lenders and lenders to buy used cars at cheap prices. For example, Spinney offers used car loans from its partners at a rate of 12.5%.
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New Vs Used Auto Financing
You are now subscribed to our newsletter. If you do not see any email from us, please check the spam folder. Getting pre-approved for a car loan helps you understand how much you can borrow on a car. Getting pre-approved for a car loan gives you more flexibility in choosing which car dealer you want to work with and gives you more bargaining power. You are usually required to provide certain personal, financial and employment information to the lender to be considered for pre-car loan approval. Depending on the lender, you can get a decision within minutes.
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Getting pre-approved for a car loan before you head to the dealership can help put you in the driver’s seat of the car buying process.
Pre-approval is the approval of the terms and conditions provided to you by the lender along with the estimated terms like the amount you can borrow, interest rate and loan tenure to finance the purchase of a car. This loan quote makes it easy to estimate the total cost of the loan and create a budget before you start shopping.
A pre-approval is a great way to let the seller know you’re a buyer who’s done your homework. Also, if you get preapproved, you don’t have to rely on dealer financing. This gives you more bargaining power at the dealership, which can make the car buying process less stressful.
What To Keep In Mind Before Taking A Loan To Buy A Used Car
Getting pre-approved for a car loan is an easy process – provided you’re prepared with the software documents you need and have healthy credit. Let’s find out what you can do to help get pre-approved, how it can benefit you, and what you might want to consider if you don’t get pre-approved.
If you have your heart set on a shiny new car — or a used car — you might be tempted to run to the dealer and start negotiating. But if you don’t get approved for a loan before you start shopping, it can be difficult to know how much you can borrow up front, and you won’t know what kind of car you can buy. Yes. Here’s how taking the time to get pre-approved can help you succeed.
Getting pre-approved for a car loan helps you set realistic expectations about what you can afford. Once you get auto loan approval, the lender provides a quote for the amount you can borrow and includes the car title, taxes and surcharges.
You’ll also get an idea of your interest rates and loan terms so you can calculate your monthly car payments and the number of cars you can afford. Remember that you do not have to apply the maximum number of times you are pre-approved. And in many cases – after factoring that into your remaining expenses – it’s a good idea to get as little debt as possible.
Is It Better To Finance A Car Through A Bank Or Dealership?
If you haven’t taken the time to crunch the numbers before you get to the point of selling, it’s easy to get distracted wondering what you’ll be able to afford and what your monthly payment will be. But if you already have an idea of how much you can spend first, you can focus on cars that fall within that price range and your budget. This will help you feel confident that your loan payments won’t stretch your budget too thin.
If you go to a dealership without getting approved for a car loan in advance and find your dream car, it can be tempting to take whatever financing is available to avoid losing the car. But with good credit, you can find exactly what you need. Also, if you have pre-approval from multiple lenders, you can choose
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