Looking for a loan for a used car? Read this blog to know what you should consider before opting for a loan for your used car.
Buying a new car is always worth the money you shell out of your pocket. But if you approach a reliable car owner who is ready to sell his car in good condition, that would be a wise decision. An informed decision can get you a car that costs within your budget, and gives you the same pride of owning a wonderful vehicle! It doesn't matter if you look forward to a dealer for a second-hand car or a private individual. Do some research to make sure that the seller doesn't cheat you selling an inferior quality car. Almost 4 million second-hand cars were sold during the last year. There is a shift in the trend of buying a pre-owned vehicle instead of a brand new car in recent years.
Many lenders provide second-hand car loans. There is a boon in the pre-owned car market. Due to the ever-growing demand for the used car, the car sellers are replacing many of their unsold cars with pre-owned cars to increase sales.
1. Go Through The Documents Completely: Before opting for a second hand car loan, call your trusted mechanic to check the vehicle properly. This will help you to find out hidden damages, if any, to fix the appropriate price for the car. Check for the following documents: RC Book, Original Purchase Invoice, Road Tax Receipt and NOC from the earlier owner’s financial institution. You must also ask for the insurance papers to check whether the car has had any previous accidents. Ask your mechanic to check whether the brakes work properly or the tire is out of shape. Any anomalies, you can detect it then and there.
2. Rate of Interest: Used car loan interest rate is the most important thing you should consider before deciding on which bank to approach for a loan. In India, used car loan interest rates would fluctuate between 9.5% to 17% . The rate of interest on a second-hand car loan is an important factor to determine your EMI
3. Processing Fee: When you approach a financial institution for a loan for a used car, check for the processing fee, they charge in addition to the used car loan interest rate. Some lenders charge a high processing fee that will add up the cost of the used car.
4. The Upper Limit Of The Loan: Any lender will appoint an assessment officer to calculate the value at the moment. The second-hand car loan amount offered would be around 70-80% of the value of the pre-owned car. If the pre-owned car owner is ready to sell at an amount of 6lakhs, and the assessment officer has fixed the value of the car as Rs.5 Lakhs. The lender will extend a used car loan amount of Rs.4, 80000. You will have to make up for the balance amount as a down payment.
5. The Term Of The Loan: If your car is old, the lender will grant you a lesser amount as a loan as it requires frequent maintenance. Always prefer a car that is relatively newer to get a decent amount as a loan for a used car.
6. Credit Score: The lenders take into account the credit score before extending a personal loan. If your credit score is less, they will deny a loan out rightly. The lenders extend a personal loan without any collateral, and hence the financial institutions are undertaking a high risk in such cases. But a loan for a used car can be less costly. That doesn't mean credit scores carry no significance at all. The better the credit score, the higher the loan amount and lower the rate of interest too.
7. Research About The Loan Market: When you approach a lender for a second-hand car loan, research about the different financial institutions to know the maximum loan amount they are ready to lend and the hidden conditions that pull the cost of the vehicle up. Consider all the pros and cons of the loan going lender by lender. This will help you figure out the best one lender for your pre-owned car loan.
In short, the use of pre-owned cars has risen due to the high cost of brand new cars in India. Even though many lenders have come forward to provide a second-hand car loan, it is always advisable to go through the terms and conditions and get a loan at the lowest rate of interest.