You’ve found a used car to buy for yourself, and now need to take a second hand car loan to complete the purchase. With so many used car finance companies and banks offering new and complex loan products, this can seem like a daunting task. Where should you start? What should you avoid? Where should you focus?
- Improve Your Credit Score: Your credit score has a major effect on the interest rate you are offered. So before you go to a bank or check your eligibility for loans online, check your credit reports. There may be issues in your credit report that might affecting your credit profile. These can include as a previous loan EMI that wasn’t paid on time, or missed credit card repayments. These seemingly minor issues can lead to a far higher interest rate for your used car loan. So first, get your CIBIL credit score for free from the CIBIL website, and find out how to improve it.
- Pay All Miscellaneous Fees Up Front: Before the final contract is drawn up, the dealership sales manager might pitch you additional products and services. Always ask for a breakdown of any additional charges before you agree to sign the contract. Keep in mind that as soon as you sign the sales contract, the car is yours. So take your time to review the contract. Don’t allow yourself to get pressured into signing anything, just to get it over with. The contract will include the price of the car and applicable taxes. Depending on the dealership, it may also include miscellaneous charges ranging from the common processing fees to “sales development fees”. Paying for all of the fees upfront will help keep the amount of money you have to finance lower, which will help you save money. This will also ensure that your loan terms remain the same as what you had initially agreed upon.
- Shop Around Before Visiting Dealers: Prospective customers often finalize the model of the car they wish to purchase in a hurry. This leaves them with no idea of the interest rate to expect from dealerships. So make sure you know the interest rate relevant to your financial profile and your chosen car before you apply for a used car loan. Otherwise, you risk being taken advantage of, from this lack of information. Your best way to protect yourself is to simply arm yourself with as much knowledge as possible. In addition to the EMI, look at processing fees, taxes, transfer and any other surcharges the lender bills you. Most importantly, learn about all your financing options, before you hit the road. Apart from banks and dealers, there are other options for your used car loan. Online used car loans from fintech startups such as CreditMate offer you flexibility and transparency. Choose a car from anywhere you want with CreditMate, from dealerships to online classifieds. In fact, you can even purchase your neighbour’s car with a CreditMate loan!