Aside from the manufacturer, model, exterior styling, fuel efficiency, and vehicle performance, there are several options while purchasing an automobile. Loans and financing for a vehicle are vital components of the car-buying process. Still, they can pose several challenges that do not always have simple solutions. So we researched with some vehicle financing experts, who assisted us in resolving the most prevalent concerns, queries, and misunderstandings about used car loans.
What is a Used Car Loan?
It is a secured loan, but in this situation, the borrower can use it to buy a pre-owned (used or second-hand) car. Used car loans, like new car loans, are repaid in monthly instalments (EMIs) over a certain period of time. The lender’s loan amount is determined by the vehicle’s age, physical condition, overall health, and operating parameters, in addition to a variety of other factors important to the borrower.
A step-by-step guide to taking a used car loan
Explore the used car market
The market for pre-owned automobiles is huge and has expanded at a healthy clip in recent years. You’ll find many manufacturers and models when looking for a used car. After settling on a course of action, it’s time to develop a list of requirements.
List required specifications
Standard equipment varies widely from one vehicle to the next. The more money you can spend, the more likely you will receive a car with luxurious amenities. Start comparing engine size, peak horsepower and torque, gas mileage, battery life, and more.
Choose your car
With the list of requirements in hand, you can begin compiling a list of potential vehicles that meet your needs. Viewing the car in person at the used car lot is best. Don’t worry about grilling the salesperson on the vehicle’s specs, capabilities, and optional luxury extras. You can complete your car once you find out all the necessary information.
You may learn a lot about the car’s condition from taking it for a spin. If you want to know how the car is doing, it’s better to put some miles on it rather than just a couple of kilometres. Driving a vehicle will provide important details like gas mileage, battery life, engine output, and air conditioning.
Once you’ve completed the above tasks, it’s time to compare used car loan providers. Ensure you are eligible by analysing the interest rate, required paperwork, and other requirements. The following are some of the standard requirements used by most lending institutions:
- The individual is an Indian citizen.
- Minimum Age: 18
- There is a one-year minimum requirement for business owners and employees in the paid workforce.
Online or in-person loan applications are available to those who meet the lender’s minimum requirements. Those who want to submit their paperwork at a lender’s office must do so. Submit your completed application, and the required Know Your Customer paperwork there. To apply online, you must visit the lending institution’s website and fill out some basic information. A lending company official will contact you by phone to finalise the application.
Things to look after when applying for a used car loan
Try to pay a higher down payment
Lenders will often finance 70%-95% of the value of a used car, leaving the remaining amount for the buyer to cover. Reduce your monthly instalment payment costs by making a larger down payment.
Keep all required documents handy
When applying for a car loan, have all the necessary paperwork ready. You’ll easily get a loan if you provide the whole package. These include the vehicle’s registration certificate (RC), no objection certificate (NOC), pollution under control certificate (PUC), and insurance papers.
Compare interest rate
Once you settle the automobile parallelly, you will start looking for funding, and several financing choices will be accessible for used cars. Multiple banks & NBFCs give loans for old automobiles. All you need to do is compare used car loan interest rates before the loan approaches to get lower rates.
In recent years, car sales have increased due to an increase in financing options, e-commerce platforms for used cars, and lender-friendly policies. Along with new vehicle loans, used car loans have emerged as an alternative option for those looking to commit a smaller sum to a car purchase.