While buying pre-owned vehicles, people are curious to know about the ideal used car loan tenure. One of the most essential aspects you need to consider while applying for a car loan is selecting its tenure. You need to decide whether you want a short-term or long-term loan duration. Both the options have their pros and cons.
For instance, if you choose a longer tenure, the Equated Monthly Installment (EMI) will be low, but the interest will be more. Conversely, if you pick a short loan period, the EMI will be higher. You can choose the duration for the used car finance based on your current monetary situation and the capability to repay the loan on time.
Here is how you can evaluate your present financial position.
- Calculate your monthly savings
For this, make a list of all your expenses and deduct them from your income. Do not forget to subtract the amount of other EMIs, Systematic Investment Plans (SIPs), insurance premiums, and other fixed expenses from your income. It will help you understand how much money you can save every month.
- Determine the expected flow of income in the future
Consider the estimated earnings from your investments and the rise in salary to finalize the sum you can pay for your used car loan EMI. For instance, if you do not have any major expenses like house renovation and an international trip with the family, you can afford to pay a substantial sum as EMI, which indicates that the loan tenure will be short. Conversely, if you have to meet other financial obligations, opt for a lower EMI, which will increase the loan period.
- Know about the norms related to prepayment
To be on the safer side, you can choose a longer tenure, as you can prepay your loan and reduce the duration. However, you need to consider the prepayment charges over here. Such expenses vary among financial institutions. Therefore, it is advisable to consult your lender before you prepay a part of your loan.
Now when you know how to select the tenure for your used car loan, it is time to become a smart borrower so that you can repay it without any problem. Also, you need to select a credible lender to ensure that the process is fast and smooth. Mahindra Finance offers reasonable used car loan rates and quick disbursement of funds. Visit its website now and find out about the used car loan eligibility.