The year 2020 altered most parts of our lives, and the one part that drastically changed was the way we commuted. This pandemic has pushed us away from using public transport to choosing private vehicles.
Do you also want to purchase a car for a safe commute? Are you wondering how to arrange the finances for the same? If yes, then opt for a used car loan. Nowadays, second-hand vehicle finance is available at low interest rates and with flexible repayment terms.
Selecting the ideal tenure for used-car finance
One of the most important factors to consider while applying for auto finance is the maximum tenure for a used car loan. Both long and short tenures have their own advantages.
- If you opt for a longer tenure, your monthly EMIs will reduce, but you will end up repaying the loan for a significant amount of time.
- If you opt for a shorter tenure, your monthly EMIs will shoot up, but you will end up repaying the loan faster.
Are you still confused about how to choose your ideal tenure? Here are the three important factors you need to keep in mind before choosing your loan tenure.
The monthly surplus
To calculate your monthly surplus or disposable income, you must subtract your net income from expenses. While reducing the expenses, it must also include mutual funds, insurance premiums, EMI’s to other loans, and the like. This will give you an account of the surplus cash in hand.
If you have a considerable disposable income left, you can go for a shorter EMI tenure, but if you wish to use said monthly surplus for other things, go for a longer tenure.
Future cash flows
If you already know you have a major expense coming up in the near future, it is best to lower your EMIS’s. Unless you are at a stage where your income is going to increase, then a shorter EMI tenure can work well for you.
Prepaying the Loan
During the initial period, it is generally a good option to choose the maximum tenure because you can always decrease the tenure later by opting for prepayment. Prepaying a part of your loan means paying off part of the debt before its due date.
Doing this will help in bringing down the EMI amount as well as the total interest to be paid. While several lending institutions have zero prepayment charges for a used car loan, it is always advisable to check with your lender before closing your loan early.
Do you want to calculate a used car loan tenure you would be most comfortable with? If so, then use an online used car loan EMI calculator to accurately calculate your potential EMIs with suitable tenure durations.
And, start turning your dreams into reality by opting for used car finance from a trusted financial institution before it gets too late!