Buying a pre-owned or used car can be a smart move, especially if you can negotiate a good deal. Today, several car manufacturers also have a used vehicle division. While pre-owned cars are usually cheaper, some people may still not have the required funds. This is when a Used Car Loan is valuable.
If you consider this financing option, numerous factors influence your Loan eligibility. Let us understand the Loan better and consider the factors affecting your eligibility.
Overview of Used Car Loans
Used Vehicle Financing works like Loans for new cars. It is a credit you opt for from a bank that lets you buy a pre-owned car. The process of applying for it is typically straightforward. Salaried and self-employed individuals can apply for this Loan from their chosen bank. Your bank may also offer up to 100% financing for used vehicles.
You also get the opportunity to pick a repayment tenure that matches your financial situation. If you select a longer tenure, your monthly instalments are smaller. On the other hand, if you opt for a shorter tenure, you need to pay a higher sum for your monthly instalment. However, you can repay your Car Loan faster.
Factors affecting Used Car Loan eligibility
If you are considering a Used Car Loan, your eligibility is typically influenced by various factors:
- Your age
Your age is one of the several factors that affect your Used Car Loan eligibility. Some banks require you to be at least 21 years old to apply for this Loan.
- Mileage or age of the vehicle
Banks generally have a cut-off for the mileage and age of the car. This way, the Loan is backed by a four-wheeler that remains valuable and reliable during the Loan tenure. The older the vehicle you want to purchase or the higher miles it has clocked, the greater the value of the car depreciates.
- Credit scores
This is a significant factor that determines Used Car Loan eligibility. Banks check the score to determine your creditworthiness. It is a crucial indicator of the risks linked to lending you the funds. A higher score results in a greater Loan amount and lower interest rates. Usually, credit scores higher than 750 unlock the best Loan conditions.
- Your income and employment
Banks need assurance that you have a reliable income source to repay the Loan. Hence, having a higher income and steady job can boost your Used Car Loan eligibility.
- Current debt status
Your present or existing debts also play an essential role in determining your eligibility for a Used Car Loan.
Conclusion
Buying a pre-owned car can be a good choice for many people. However, if you are applying for a Used Car Loan for assistance, determine your financial situation and select a Loan option that matches your preferences and needs.
