Owning a car has become more of a necessity than a luxury, and the purpose of a car or used-car loan is to ease the financial dilemma when purchasing one. Apart from the confusion about which car to buy, many find themselves unsure about whether they should buy a new car or a second-hand one. No matter what the choice, you will get a car loan in both cases.
Both these loans have their differences and individual advantages as well. Read on to find out how different a used car loan from a car loan.
Tenure of the loan
A car loan usually comes with a long tenure, sometimes up to seven years. On the other hand, loans for used cars offer tenures of around one to five years. Nevertheless, your used car loan eligibility and car loan eligibility criteria may also play a key role in influencing your tenure, and your lender can inform you how.
Amount of the loan
The loan amount for car loans is usually higher, up to 90% of the price of the car. Since second-hand cars usually cost less than their first-hand counterparts, the total second-hand car loan amount is generally lower. Essentially, the loan-to-value (LTV) ratio is higher for new cars as opposed to used vehicles, which is why there is a difference in the amount of loan amount disbursed.
EMI on the loans
Several lenders offer both car and used-car loans with flexible repayment terms. Lenders who wish to avail of any one type of loan can negotiate an EMI plan that does not thwart their lifestyle substantially. However, before settling on an EMI plan, make sure to use an online car or used-car loan EMI calculator. Doing this will help you accurately evaluate the kind of instalments you would be comfortable paying.
Interest rates for the loan
Lenders offer loans for new car loans at slightly lower interest rates. Due to wear and tear and quality uncertainty of old cars, used car loan interest rates are comparatively higher. However, since used-car loans are not of as high an amount as car loans, the EMI payments don’t pose a burden on the borrower.
To summarise
Purchasing a car while opting for a car or used-car loan is a long-term commitment. Therefore, browsing through the factors mentioned above can help a great deal when making a decision. Confirm your choice only after gauging the perks to find out which loan suits your requirements the best.
So, why wait any longer? Simply choose your purchase and finance it with either of the two loans today!
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