Most consumers consider affordability while buying a car, making them prefer to own a used card. Currently, the used car industry is around 1.3 times the new car industry in India. In this digital era, when getting financial assistance is fast and convenient, most consumers prefer securing funds through a used car loan instead of using their savings to buy a car.
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Overview of Used Car Loans
A used car loan is a convenient financing option for individuals looking to own their dream car. Renowned banks and non-banking financial companies (NBFCs) offer used car loans that cover a variety of cars, Multi-Utility Vehicles (MUVs), Sports Utility Vehicles (SUVs), and more.
Customers can own a high-end pre-owned car for the same price as they pay for a new car with the help of a used car loan. Customers can get a loan of up to 95% of the Insurance Declared Value (IDV) of the used car value. Securing a used car loan online is a fast and hassle-free process that requires minimal documentation.
Borrowers pay a fixed monthly amount to repay the loan during the specified tenure in the loan agreement. The loan amount, applicable interest rate, and preferred tenure decide the loan EMI. It consists of the principal amount and the interest accrued to be paid monthly by the borrower.
EMIs and interest outgo are the two crucial factors when considering financing options for a used car. Customers can utilise a used car loan calculator to make informed decisions regarding loan instalments, tenure and total interest outgo.
How to Utilise Used Car Loan Calculators For EMI and Interest Comparison
A used car loan calculator is a powerful tool as customers can determine their EMIs and total interest cost even before applying for the loan. Borrowers can map the path to repay the loan effectively.
This calculator is a ready-to-use tool that works based on the input provided by the user.
1. Input the required details in the used car loan calculator.
- Loan Amount: Customers need to provide the loan amount. They can choose up to 95% of the IDV of the selected pre-owned car. Ensure to set the required amount only as a high loan amount may be an unnecessary financial burden.
- Interest Rate: Next, set the interest rate that the lender offers on a used cars loan. It starts with 0.70% per month (8.50% annually) with reputed lenders depending on how well one meets the loan eligibility. Various eligibility factors include the gender, age, and income of the loan applicant, history of employment, additional source of income, loan amount and tenure, etc.
- Tenure: Loan tenure is flexible for used car loans. Customers can select a tenure between 12-60 months. Choose a tenure that fits your monthly budget. Prefer a short-term tenure, if cash flow allows, to reduce the total interest outgo. A long-term loan can reduce the EMI but results in more interest amount.
2. Calculate EMI and Interest Outgo
The used car loan calculator will show you the estimated EMI based on the details provided. It is the monthly payment towards the loan. The EMI includes the interest amount also that the borrower will pay over the loan tenure. Most calculators display the EMI amount only which includes the principal and interest component. The user can get an idea of how much will be the total interest outgo during the entire tenure.
Comparing Used Car Loan EMI and Interest Using the Loan Calculator
A loan calculator can display the EMI amount in a fraction of a second based on set figures by the user. Customers can try different combinations of loan amount, tenure and interest rates and compare the results. It will help them to know the best option to choose based on affordability. Let us explain with illustrations.
Illustration 1: Let us say the loan amount is Rs 1 lakh, the repayment tenure is 20 months, and the interest rate is 9%.
The EMI with these inputs will be Rs.5750/-.
Illustration 2: If the loan increases to Rs.1.5 lakh, the repayment tenure remains the same – 20 months and the applicable interest rate increases to 10%.
The EMI amount will increase to Rs.8750/-.
You can adjust the loan amount, tenure and interest rates and get the EMI amount (that includes the interest amount) instantly. Compare the monthly instalments and apply for a used car considering affordability.
Conclusion
A used car loan calculator allows the borrower to estimate the monthly instalments and interest amount in different tenures. Customers can compare the EMI amount (which includes the interest amount to be paid every month) and make informed decisions. Consider applying for a used car loan with the most suitable loan amount, and tenure for convenient repayment.