Are you confused between buying a new car and a second-hand one? No worries, you are not the only one facing this dilemma. While buying a brand-new four-wheeler can be exciting, a used car has advantages. These days, as used cars are nearly as valuable as their brand-new counterparts, you may find them more lucrative than purchasing a new one. Also, if you are learning to brush your driving skills and do not want to risk buying a new car till you are an expert at it, a used car is your best bet.
A used car loan is a savior if you are short of funds or do not want to exhaust your savings. The best way to get started with applying for a used car loan is by approaching a bank or a lender and checking their eligibility criterion, the loan application process, documents required for a personal loan, etc., repayment tenure options, and more.
Your favourite car is just a few easy steps away. Let’s see why it is a good option for those looking for a second-hand car loan.
- High Loan Amount
One can get finance on the second-hand car for as high as Rs. 50 lakhs.
- Unparalleled Interest Rates
While it is true that interest rates for used cars are on the higher side, considering the risks involved for both the lender and the buyer, few finance companies offer unmatched interest rates.
- Minimum Paperwork
Nearly the entire used car loan procedure can be done online. You may only be required to submit the loan application form at the branch office of the lender. The entire process is quite simple, making the complete procedure hassle-free.
Moreover, you get instant approval on a car loan once the documents and the application are verified.
Tips to get faster approvals
Improve your credit score: Your credit score (for example, CIBIL) plays a crucial role in deciding your loan eligibility. In case if you have a lesser credit score, it needs to be first fixed by closing on-going loans, timely payments of EMIs, etc.
Arrange documents and down payment
Some financial institutions may tell you to pay roughly 15% to 20% of the car’s price, and they finance the rest of the money.
You need to ensure that you have the required sum in place before you file the loan application.
It is always advisable to refer to the lender’s website to know what documents are required and accordingly keep them ready.
Try to purchase your used car from a reputed dealer.
Generally, used-car dealers have links with financial institutions, and getting the loan becomes quicker and easier if you buy from a dealer with tie-ups with the lenders.
Second-Hand Car Loans
Second-hand car loans come in handy if you wish to buy a pre-owned car and do not have enough money. Several banks and other financial institutions provide instant approvals on car loans if your documents are in order. Here are a few things to keep in mind before approaching a bank or NBFC for a used car loan:
- Interest Rate and Tenure: Loans for second-hand cars charge higher interest and have a shorter repayment tenure than a loan for brand new cars. Since this impacts the EMIs you need to pay, it is relevant to consider these factors before applying for a loan.
- Processing Fee: Loan providers usually levy a nominal fee of approximately 2% of the total loan amount as a processing charge. The principal amount that gets disbursed to you will have this fee reduced from it. Some banks and NBFCs may let this charge away, but it depends on their terms and conditions.
- Pre-closure charge: Most financiers give you a choice to make part payments or complete pre-payment to clear off the debt before the tenure ends. However, financiers may levy a pre-closure charge, which differs from institution to institution.
Documents required for personal loan/used-car loan
For applying for a used car loan, you will need to furnish your address proof, identity proof, income proof, and age proof. Here are some of the documents you need to submit:
- Identity Proof: A valid photo ID, such as Aadhar Card, Voter Card, Passport, Driving License, or PAN card.
- Address Proof: A copy of the electricity bill, passport, ration card, Aadhar card, etc.
- Income Proof: This includes income in the form of your salary account statements that you can fetch from your bank for the last three months or the three months’ salary slip copies. If you are self-employed, submit an Income Tax Return for the previous year or as the bank requires.
- Miscellaneous documents: Mobile bill copy or landline copy also need to go along in the document file for loan processing.
- Registration Certificate of Vehicle: The most important thing you need to mark in the checklist of documents required for a personal loan/used car loan is a copy of the used car registration certificate.
These loan documents are sufficient to get you instant approval on the car loan. Now that you know everything necessary about a used car, you can keep all the papers handy to get a faster loan sanction.
New cars might appear too enticing; but, from the initial price to the extended payments to finance availability, purchasing a second-hand car is an easy-on-the-pocket option you can avail of. With the accessibility of more reliable loan options, you can now get your desired car at an economical rate. All you need to ensure is that you do proper research about your financing partner and purchase your used car from a dealer of repute.