An affordable way to buy the car of your dreams is through a loan. There are various aspects to be taken into consideration while borrowing a second-hand car loan like repayment options and interest rate, besides others. Another crucial decision-making factor while availing of a used car loan is the loan tenure. This article talks about Used Car Loan Tenure.
Meaning of loan tenure
The period from the date of disbursement of the loan to your account to the date of the final Equated Monthly Installment (EMI) payment is known as the loan tenure. The loan repayment period is inversely related to the regular payment amount. A longer tenure indicates a lower EMI and vice versa. A longer tenure option is offered to those who have numerous other financial expenses and would like to minimize their EMI amount.
Human psychology may indicate that a lower EMI may mean lower cost of borrowing. However, this is not true. It is important to understand that lenders charge a slightly higher interest rate for an extended loan tenure. Therefore, conduct a cost-benefit analysis and identify whether extending the loan tenure is a profitable decision.
Tata Capital, the financial arm of Tata Group, offers loan tenure of up to five years for used car loans. This reputed institution also provides various other benefits like customized repayment options, minimal documentation, quick and hassle-free loan processing, besides others. Additionally, you could also buy Tata Capital used cars in India through its numerous used car listings from over 2000 car dealers across the country.
There are certain factors that lenders take into consideration while deciding to grant you a longer loan tenure. These five factors are as follows.
- Your income
The amount you earn indicates your repayment ability. Therefore, a good income will help you get longer loan tenure. In such cases, you may also negotiate for a lower interest rate as the lender perceives you as someone who will not default on his payments.
- Borrowing amount
The amount that you wish to borrow also has an effect on the period of the loan. In case you wish to borrow a higher loan amount, you may avail of extended loan tenure and vice versa.
- Your credit score
The Credit Information Bureau (India) Limited (CIBIL) rates every individual for creditworthiness based on the past credit repayments. Therefore, the higher your score, the better will be your chances of getting favorable terms on the loan. With a high score, you are in a better position to seek extended loan tenure.
- Prepayment terms
In case your lender allows you to make prepayment without any additional cost, you may opt for a higher duration to repay, thereby reducing your EMI burden. Whenever you experience a surge in income, you could prepay the loan, thereby lowering the outstanding loan amount.
- Your age
Lenders expect you to repay the borrowed amount before you reach retirement. In case you are in your late 20s or 30s, you stand a higher chance of getting approval for longer loan tenure.
If your financial position does not allow you to make a higher EMI payment, you may opt for a longer tenure. However, take into consideration the interest rate and make the right choice based on the cost-benefit analysis.
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2 responses to “All About Used Car Loan Tenure”
Hi,
Great article.
I want to borrow some amount. I have learned that banks have a certain eligibility criteria for the borrowers. Do other platforms also have these like peer to peer lending?
Peer to peer lending is a great platform for both borrowers and lenders. I read an article on how P2P platforms conducts eligibility test on borrowers http://www.loankuber.com/content/peer-to-peer-lending/does-peer-to-peer-lending-platform-also-have-a-negative-list-of-borrowers-like-banks/.