Cars are the primary mode of transport for every family. Cars offer all the best benefits, from safety and assuring more effortless mobility to the freedom to travel on your terms. But buying a new or a second-hand car is challenging for everyone because of its expensive cost. However, with the wide range of car loan offerings available, you can effortlessly buy a car without draining your savings. If you already have a car, you can use it as collateral to buy your new, used car with a loan against the car.
But it is vital to plan wisely and consider various things before availing of a loan. To lower your loan EMI, you need to lower your interest rate to ensure an affordable monthly budget. If you are wondering how to reduce your used car loan interest rates, this guide will help you lower your interest rate.
What Does Loan Against Car Interest Rate Means?
A loan against car interest rates refers to the sum that a loan provider charges for offering a loan to the applicant. It is a percentage of the total loan amount which an applicant borrows. Different lenders offer different second-hand car loan interest rates. Still, interest in used cars is higher than brand new cars as old vehicles lose their value, and dealers spend more money to make the car run. When you work on reducing your loan against car interest rate, it also helps you reduce your monthly EMIs.
How to Lower Your Second-Hand Loan Against Car Interest Rate
Balance Transfer
Used car loan balance transfer refers to transferring your loan from one lender to another, which offers more competitive and flexible interest rates. If you pay a higher interest rate, you can move your loan to another provider.
Competitive Rates
The rate of interest you pay on your loan against car influences the overall EMI cost. To avail of the most competitive rates, you need to check your credit score and try to improve it if it is below 750.
Go With Your Existing Lender
Before searching for a different lender, contact your existing loan provider or bank, as lenders are more likely to offer competitive interest rates to their current and loyal customers. Moreover, you also need to have a good relationship with your loan provider to get lower interest rates.
Improve Debt-to-Income Ratio
The debt-to-income ratio is the metric that shows that the borrower can pay their EMIs. If you have higher debt than your income, the loan provider will charge a higher Second-hand car loan interest rate or may reject your loan application.
Maintain Your CIBIL or Credit Score
A credit score shows the creditworthiness of an individual. If you have an excellent credit score by repaying your previous credit on time, your lender will attract it, allowing you a used car loan at the lowest possible interest rates.
Make a Higher Down Payment
When a borrower pays a high down payment, it helps the lender know that they can pay off the loan. So, a loan provider offers a lower second-hand car loan interest rate if a borrower makes a high down payment. As the loan amount is low, the EMI will also be lesser, which also helps reduce the interest rates.
Opt For Shorter Repayment Tenure
When you go with longer repayment tenure, it will automatically reduce your EMI, and with the lower EMIs, you have to pay more interest rates on your loan. So it would be best if you opted for a shorter tenure to get a lower interest rate.
Conclusion
If you do a little research and consider the points mentioned above to lower your loan against car interest rates, you can find your loan’s best price. However, when applying for a loan, you must read the interest rate and ask your lender for other ways to reduce it. So, before applying for your used car loan, you must ensure you get the lowest interest rate.
