Top 5 Factors That Determine Your Used Car Loan Rates

Whether you are looking to buy your first car or searching for a vehicle that can accommodate your family, you have to take into account the car finance rates. If the vehicle you are planning to buy is a second-hand car, understanding the factors that can determine the used car loan rates, is even more important. The interest rates vary widely among different buyers because every individual has a distinct financial profile. However, certain factors remain the same and can make a huge difference in determining the used car loan rate.    
 
Here, we will take a look at five of them -
 
Debt to Income Ratio
One of the important factors that is taken into account to determine the used car loan rate is your debt to income ratio. Simply put, your debt to income ratio is fundamentally an indicator of the money you owe in the market (your debt) to your present income. Taking this factor into account helps lenders assess whether you are creditworthy or not. If your debt to income ratio is high, it means that you owe a significant amount of money to the market, and so, your chances of repaying the amount are less. On the other hand, if the ratio is less, then you can pay back your EMIs in a more timely and consistent manner. Therefore, to get the lowest used car loan rates, maintain a low to moderate debt to income ratio.
 
 Also Read: Financing Your NEW Used Car
 
Size of the loan and down payment
Depending on the size of the loan you want to avail, and the amount of down payment you are willing to put forward, the lender will determine the rate of interest. Higher the down payment, the lower will be the used car finance rates.
 
Credit score
Another important factor that can determine the interest rate of your used car loan is your credit score. Your credit score is a number given to you by a credit rating agency after taking various factors into account. These factors include the number of loans you have taken in the past, the total sum you have loaned, your repayment history, and missed payments, if any. If you have a good credit score, it becomes easier for the lender to assess your creditworthiness. If they deem you worthy, you can get the best used car loan rates.
 
Also Read: Getting The Best Interest Rate On A Used Car Loan-Everything You Need To Know
 
Age of the used car
Age is another crucial factor that must be taken into consideration when you are purchasing a used car. While the interest rate for a new car has no direct correlation with age, it is not the case with a pre-owned car. In this case, the older your car is, the higher will be the interest rate.
 
Tenure of your loan
The tenure of your loan is also taken into account while determining the rate of interest. The longer the tenure, the higher will be your used car loan financing rate and vice versa.