An individual social status is defined by the car they drive. Buying a new car can be expensive and a distant dream for many. A used car is an excellent money-saving solution for people who have a tight budget for a car purchase. Various financial institutions offer second hand car finance. You can seek loans from such institutions to make the desired purchases. However, there are a variety of things you need to consider before entering into a loan agreement to avoid issues later. This article aims to shed light on the common mistakes people make while applying for second hand car finance. Read this to know what the mistakes are and how to avoid them.
List of Mistakes to Avoid During Used Car Loan Financing
- Overborrowing – A common mistake people make while applying for a Used Car Loan is borrowing more than their budget. And taking a higher loan than the budget can stress finances and lead to non-repayment of the borrowed amount. Lenders take the case of a loan default very seriously. And this makes it more difficult for you to qualify for loans in the future. Before applying for a specific loan amount, use an EMI calculator to know how much you can manage to pay. The calculator helps understand a given loan’s affordability to ensure no future complications arise. Making a proper budget, mapping future expenses and understanding the EMI amount can help individuals make better decisions.
- Selecting a longer tenure – While applying for a Used Car Loan, many applicants tend to choose a longer tenure. A more extended term may carry lower EMIs. However, a longer-duration loan may lead to higher interest rates and a longer commitment. A good practice to find a suitable tenure is to assess finances to see how long you can afford to pay. The cost of longer-duration loans is considerably higher since they accrue more interest. Applicants can use the EMI calculator to understand their preferred loan tenure before applying for a Used Car Loan. The calculator can help buyers make efficient decisions in selecting the most suitable loan tenure without affecting their affordability.
- Not Making a Down Payment – Many financial institutions may offer facilities of zero down payment. However, making a down payment helps reduce the overall burden of a loan. Applicants who make down payments can select lower-tenure loans that can help them get attractive loan terms, lower interest rate means an affordable EMI.
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- Financing the add-ons and accessories – While applying for a Used Car Loan, individuals must maintain proper budgets to help them repay efficiently. People often extend their loan budgets when buying a used car by piling add-on features, such as an inbuilt navigation system. However, such additions could magnify the loan amount substantially, making it unaffordable. Try to stick to the budgets and use the EMI calculator to avoid getting drawn into exaggerating the loan amount.
- Paying a High-interest rate – Used car buyers can seek help from various financial institutions to finance their car purchases. However, buyers must be careful before zeroing in on a lender. Because some financial institutions may charge higher interest rates and add additional charges making the loan costlier. While selecting the lender, look for institutions such as Muthoot Finance two wheeler loan that offer attractive interest rates on Used Car Loans and no hidden charges.
- Shopping without Pre-approval – A common practice among buyers is to plan a purchase and then seek a loan from a financial institution. However, people opt for pre-approved loans since these are approved quicker and the interest rate is also reasonable. Additionally, with a pre-approved loan, the buyers already know the interest rates and other loan terms that can help them make more efficient decisions. Pre-approved loans also eliminate issues such as sanction delays and make buying a used car a more confident decision.
- Not Reading the Terms and Conditions – Multiple charges, such as processing fees, interest rates, prepayment and penalty fees, can vary across financial institutions. Therefore, buyers should read the terms and conditions before signing a loan. Muthoot Finance is a trusted financing solutions provider that offers a transparent process for granting Used Car Loans.
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Conclusion
A used-car loan can be an excellent option for purchasing a dream car. However, buyers must carefully select the appropriate loan amount and tenure and seek the best interest rates before applying for a loan. Paying attention to the abovementioned mistakes can help individuals get the best deal on their Used Car Loans.
