Points to Consider Before Taking a Used Car Loan

Gone are the days when a car was just a symbol of luxury, today it’s a necessity. When public transport proves to be too crowded or its irregularity becomes a matter of irritation and hailing cabs burns a hole in your pocket, having your own car appears to be a great solution.

However, not all of us might have the money to buy a new car. Despite the drop in cost, a car’s price can still run into few lakhs. This is where one should think of buying a used car and to make things easier, get a ‘used car loan’ available at financial institutes and non-banking finance companies (NBFCs). In fact, the trend is catching up fast.

In India, the used car market is estimated to reach over $ 66 billion by 2022 courtesy of growing population, rapid urbanization, and increasing inclination of customers towards used cars because of the affordability quotient. Online buy-and-sell platforms have brought dealers and buyers much closer in the last one decade. But don’t jump the gun; buying a used car can be tricky business. One has to make sure he/she is not landing in a bad deal. Apart from a thorough research, here are few things to consider while buying a used car:
 

Things to consider while buying a Used Car

1. Budget: Price of a used car is much lesser than the on-road price of a new car but do decide on what can you easily afford – a hatchback, sedan or an SUV? Remember that in case of loans, the valuation of the car done by the lender will be lower than what you are shelling out to buy. Please note that most financial institutions provide loans up to 80% value (as measured by the bank) of the used car, with the loan tenure being 1-5 years. The interest rate also depends on many factors like, how old the car is, and the category of the car. Also, set aside some amount for miscellaneous charges like processing and transfer fees in addition to the down payment.

2. Select Vehicle: Select the vehicle on the basis of your needs. Judge the used car on parameters of fuel economy, performance, safety, styling and brand. Also, popular models of car with age less than four-five years and negligible requirement of additional maintenance, fetch better loan deal from banks as compared to rare/ offbeat models. Always test drive the car.

3. Service History: Make sure the vehicle you’re planning to buy has undergone regular servicing, this will ensure the car is well maintained.

4. Paper Work: Take the necessary documents related to insurance, warranties and registration from the dealer. Don’t sign papers in the excitement of getting the car without thoroughly reading them. Once the amount is paid, dealer may not entertain your complaints.

Benefits of Used Car Loan

1. Lower Financial Burden: A loan can help you repay in small amount at a regular interval of time. The price of used cars is still quite high and arranging such a huge sum of money can make you ditch your plan for buying a car. But to buy it via used car loans gives the financial assistance that will help you own a car without feeling too burdened.

2.  Easy Instalments: The lenders provide the option of choosing customized repayment schedules with a variety of EMI plans, making cars more affordable than ever.

3. Long Tenure: Generally, the repayment tenure is of one to five years. According to borrower’s monthly repayment capability, the borrower can either opt for a longer tenure with lesser EMI or a shorter one with higher EMI.

4. Low-Interest Rates: Interest rates differ from lender to lender and you can select the one that makes EMI a manageable affair, and making a down payment can further cut down on the interest rate.

5. Quick Processing: With capabilities of digital technology, you hardly have to wait for loan sanctions as long as you have all the required documents and a good credit score.

How to Apply for a Used Car Loan

1. Eligibility: Getting finance for a used car is a simple process. Usually, you have to meet the age, professional background and income criteria of the lenders as they prefer those who have a lower debt-to-income ratio and a good credit score.

2. Documentation: Keep your Aadhaar, PAN card, address proof, age proof, ID proof, car valuation report, registration and insurance papers, salary slips and three-month bank statement ready.

Conclusion

A used car offers value for money as the insurance and registration charges are reduced along with the depreciated value of the car. Not only do you have to take a smaller amount of loan, you also have to pay lower EMIs. It is definitely wiser to go for financial assistance than total cash payment. So, no more travelling in crowded buses and metros, and no more waiting for cabs. Ride out in your own four-wheeler!