How are interest rates calculated for used car loans?

Interest rates on used car loans are mostly set depending on how risky the lender thinks your application is, and their internal policies. You’ll often notice the difference when you compare quotes — the numbers shift slightly from one lender to another, even for the same car. That’s because each lender reads your profile a little differently, and they price the loan based on that reading.

They begin with your credit record. If your past loans look steady and repayments are on time, the rate may stay on the lower side. An inconsistent record usually increases it, sometimes by a small margin, sometimes more.

An older model or a vehicle that’s been driven a lot is harder for the lender to value. When the resale value feels uncertain, the rate tends to inch up.

Shorter terms usually get a better rate simply because the lender recovers the money sooner. Longer terms feel easier on the pocket but often cost a bit more over time.

If your bank statements show several ongoing EMIs or irregular inflows, the lender may price the loan a little cautiously.

Most people don’t just look at the formula behind the EMI — they just wait for the final number on the sheet. It’s usually enough to understand what the loan will feel like month after month.