When planning used car purchases, Indians often resort to utilising their savings or avail personal loans for funding the purchase. Utilising savings for such big-ticket purchases can, however, reduce the financial cushioning of individuals while personal loans come off as costly funding options. The lending market has thus introduced tailored second hand cars finance to provide suitable funding for an affordable used car purchase.
Second hand car loans are available with several customised features to ensure easy funding for aspiring used car purchasers. When availing of a used car loan, you need to take care of a few essential factors. Following is a guide you can follow when planning to avail of a used car loan.
Presently getting the pre-owned car of your dream sounds easy, yet getting it done is still very complicated. From matching eligibility criteria, submission of documentation to choosing a suitable partner bank with affordable EMIs and friendly interest rates – a group of factors are involved with car financing. Hence, we will disclose here in this article everything regarding used car loans that you need to know before getting a used car loan in India.
Firstly, let us talk about the benefits of the loan.
Common Benefits of Second Hand Car Finance
- High loan value: Second hand car loans from some of the best lenders bring sufficient funding between Rs.50,000 and Rs.5 Lakh for suitable car model purchase.
- Funding with considerable LTV: LTV or Loan to Value ratio indicates the maximum loan amount a lender provides as a percentage of the used car’s resale value. A high LTV allows you to secure maximum financing for vehicle purchase, which can go up to 90% with select lenders.
- Loan availability with low credit score: As second hand car finance is provided against purchased vehicle’s hypothecation, it reduces the lender’s risk of funding. Thus, individuals with a low credit score can secure sufficient funding as well.
- Affordable financing: Interest rates and charges on used car loans are also considerably lower than personal funding due to their secured nature of financing. One can thus repay the advance in easy EMIs based on his/her income capacity.
- Flexible loan tenure: Although tenure availability for used car loans depends on the maximum usable life of the vehicle, some of the best lenders provide the maximum tenure flexibility for improved loan affordability.
Once you have collected the necessary details related to your second hand car loan, you can proceed with the following steps to find a suitable funding option.
Conduct a Market Research for the Suitable Lender
Although various dealerships offer used car financing to buyers, the funding provided by them in collaboration with a lender might not be the best option to go for due to the terms involved. It is, however, a smart financial decision to conduct your own market research for the best lender providing favourable terms on the car loan. Keep in mind factors like competitive rates of interest, maximum financing value, tenure flexibility of up to 5 years, etc. in mind to select the best lender for funding.
Meet Eligibility Requirements
Once you have selected a suitable lending institution, you can proceed to check the eligibility requirements laid down by them. Meeting all the eligibility criteria optimally allows you to secure funding at favourable terms, improving the chances of negotiation as well. You would be needed to meet eligibility factors like age, income, residential status, residual life of the car, etc. to secure suitable funding.
Arrange All Documents Required for the Loan
Having met the eligibility requirements, you can proceed to arrange for the documents needed to apply for the selected second hand car finance. Appropriate documentation contributes significantly to your chances of receiving loan approval.
Standard document requirement from lenders includes identity proof, address proof, income proof, passport size photograph, and the filled-up application form.
Proceed to Apply for the Used Car Loan
Next, you can proceed to apply for a second-hand car loan with your selected lender either through offline or online mode. It is, however, preferable to go for an online application as it simplifies processing and cuts short the time is taken to approve and disburse the loan amount.
Another significant mistake hasty buyers often make is that they get fascinated by a “low-cost” EMI deal. But, sadly, in reality, those buyers end up repaying a much huger amount in total. To avoid this situation, we can advise you to take help from loan calculators. It can provide you with a decent indication of your loan insights. For example, you can check and verify your interest rates, per month EMIs, and expected repayment duration for your loan amount.
Besides, it is most beneficial to focus on your car’s total value by calculating the maximum money involved in the dealer charges, insurance, taxes, down payment, loan repayment schedule, and interest payment.
second hand cars finance is one of the best ways to fund the purchase of your selected used car model. Keeping all the essential factors in mind and negotiating for the terms available shall help you procure the best loan option that remains affordable and can be repaid conveniently.