There are many options for consumers when it comes to buying a new car. It is not just about choosing the model and brand of the car, but the question is whether you want to buy a new car or a used car. This is a very important decision and will make a big difference to your finances. You need to determine the purpose of the purchase and consider whether you are eligible for the loan. Loans are available for a new car and a used car at different terms and interest rates. A look at the difference between the two loans will help you choose the right one for your needs.
A new car loan will enable you to buy a new car whereas a used car loan can be used to buy a used car. Many top lenders in the country offer car loans for buying new cars as well as used cars. Both these types of loans come with their benefits which we will discuss in the below sections.
As stated earlier, a new car loan can be availed if you are looking to buy a new car. Interest rates on new car loans range between 7% p.a. and 15.50% p.a. The interest rate can be fixed or floating. As the name suggests, if you choose a fixed interest rate, your Equated Monthly Installments (EMIs) will be fixed during your loan tenure. On the other hand, if you choose a floating interest rate, your interest rate may fluctuate with changes in interest rate trends in the economy.
-Makes it possible to buy a new car even when you don't have the money now.
-Some lenders offer new car loans up to 90% to 100% of the on-road price of the car, which means you don't have to make any down payment.
-If you have a good credit score (above 750), lenders may offer you a lower interest rate on a car loan.
-You do not need to provide any collateral for availing of a car loan.
-You can buy a car of your choice by availing of a new car loan.
-The process of getting a new car loan is simple, hassle-free, and gets approved quickly. The paperwork required is also minimal.
-Most of the car loans taken for buying a new car have a loan foreclosure/prepayment option.
A used car loan or a pre-owned car loan is ideal for you if you don't mind owning a used car, provided it is in a good condition. The used car market in India is developing to an extent where dealers ensure that the car they sell is verified and in good condition, encouraging more and more people to buy used cars. Also, many of the top banks and financial institutions in the country are offering Used Car Loans at attractive interest rates. Before taking a loan to buy a used car, you should ensure that the vehicle is not more than 5 years old as most lenders may not lend if the car is older than that. The interest rate on used car loans ranges between 9.80% p.a. and 16.80% per annum while the repayment period ranges between 1 year to 5 years. Let us look at some other features of a used car loan below:
-You can buy a luxury car by availing of a used car loan as used cars are relatively cheaper as compared to new cars.
-Financing can be availed up to 80% of the car's valuation.
-The loan application process is quick and there is no hassle.
-The maximum loan tenure offered on a used car loan is 5 years.
-Some lenders offer full transfer assistance when you take a used car loan from them.
Buying a car involves a significant amount of investment! Before finalizing a vehicle, you should do a thorough research of various car models, their features and mileage, and finally, the mode of finance.
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