The year is coming to an end and most Indians are dreaming about buying a car that could support their comfort, take care of their safety, and fit into their budget. Most of these cars that come with high safety features fall in the upper price brackets. As such going for a used car can be a smart choice. It will not only fit into your budget but also offer you the same perks and features as a new car. Plus, with many financial institutions offering affordable used car loans, you stand to gain more than you think. If you are not sure about it, read on to understand what a used car loan is and the 7 reasons why you should consider a used car loan.
What Is a Used Car Loan?
A used car loan allows you to borrow money (often up to 95% of the current on-road price) for purchasing a pre-owned car and pay it back via fixed EMIs while enjoying a low rate of interest. Compared to financing options for brand-new cars, used car loans are cheaper, as the vehicle is pre-used and will be less impacted by depreciation.
7 Reasons Why You Should Avail a Used Car Loan
Now, let’s take a look at the top reasons why you should avail a used car loan today.
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Low Rates of Interest
One of the foremost reasons to take a used car loan is the low rate of interest it comes with. Also, the better your credit score, the more you can negotiate on this rate. Additionally having a lower rate of interest increases the affordability of the loan in the long run. Also, a lower rate of interest means lower EMIs which will be easier on your pocket.
Also Read: Getting The Best Interest Rate On A Used Car Loan-Everything You Need To Know -
Instant Approval
Long gone are the days when you needed to wait in long queues and regularly follow up with your lender to get your loan application approved. These days, most used car loans come with instant approvals, meaning that once you apply for the loan, the automated algorithm of the lender will check your eligibility, cross-check your documents and approve your loan application quickly. This will not only save you a lot of time but also save you from the hassles of running from branch to branch.
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Minimal Documentation
At present, used car loans offered by leading financial institutions require minimal documentation and this is possible due to eKYC. eKYC or electronic Know Your Customer is a process through which your lender can check your eligibility for a loan just by accessing your Aadhar Card and PAN card number. Having both these details allows the lender to instantly access your credit history, thus allowing for a quicker disbursement of funds to your account.
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Pre-Approved Offers
If you have been loyal to one financial institution for a long period of time, chances are that you already have a pre-approved used car loan from them. Having a pre-approved offer will not only allow you to get the money in your account faster, but also make sure that you enjoy the benefits that come with it, like lower interest rates, minimal documentation, and quick disbursal of funds.
ALSO READ: Checklist For Your Pre-owned Car Loan Application -
Easy Repayment Plans
These days, most used car loans come with easy repayment plans, meaning that the lender will extend you a customised repayment plan suited to your specific needs so that your financial stress is less, and you can pay back the loan at your own pace. Moreover, when it comes to payment modes, apart from cash, you can pick from PDC, ECS, and NACH.
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Top-up Loan
Top-up loans are the additional funds offered over and above your existing used car loan. Typically, the top loan is offered at a lower interest rate and up to 175% of the value of your existing loan. The best aspect of securing this loan is that the lender allows freedom to utilise the funds. You can use the money to upgrade your car or for anything else. The only requirement for obtaining this type of loan is that you do not miss any of your EMIs.
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Substantial Loan Amount
Last but not the least, most used car loans offer a substantial loan amount, up to 90% of the current value of the used car. Hence, you do not need to shell out much to bring home your dream car. However, in case of a small down payment, your loan burden will be greater and it will take more time to repay.
How to get an affordable used car loan?
Now that you are aware of the second-hand car loan benefits, it is time to dive into various ways of securing this loan at a lower interest rate.
to the vehicle model you want to buy. Lenders are hesitant to approve loans for vehicles that are either too old or have been discontinued by the manufacturer. The reason is older vehicles have quite a poor resale value. In the event of default, they won't be able to recoup their unpaid EMIs. If your question is how old a car should I buy in India, then the piece of advice here is to buy one that is no more than three or five years old.
Increase down payment
Raising the down payment reduces the lender's involvement in your used car loan. This loan is typically available for a maximum LTV of 90% or a maximum amount of Rs 50 lakhs. However, if you can contribute 50-60% of the car's value out of your own pocket, your chances of obtaining a low-interest loan increase.
Improve your creditworthiness
The credit report is a vital document that plays a crucial role in determining your loan interest rate. In case you have a habit of paying your past and current debt EMIs on time, your chances of obtaining an affordable loan increase.
Your funding will be denied if your credit report shows multiple hard inquiries, missed EMIs, or cases of loan settlement. In addition, there are times when your lender fails to submit your loan closure report due to negligence. In such a case, contact the lender's executive immediately and request that your loan closure report be sent to the appropriate credit bureau.
Check Documents
Car theft has become all too common in India. When purchasing an old car, pay close attention to the various car-related documents. The registration certificate (RC) will identify the legal owner of the vehicle. Request the seller to provide a road tax receipt. Unpaid road taxes will incur a hefty penalty. Examine the insurance and service record book to learn how the previous owner maintained the vehicle. If any of the key documents are missing, you should reconsider purchasing that car because it will either result in loan rejection or a costly second-hand car loan.
ALSO READ: Guide to Financing Your NEW Used Car! Conclusion
Getting a second-hand car is a smart idea in today’s date as many car enthusiasts upgrade their car despite being in top condition. Furthermore, if you choose to buy from a second-hand car dealer then the car condition could be as good as a new one. Now that you know of all the top reasons as to why you should get a used car loan, go ahead and choose a lender and financing option that suits your needs best.
Disclaimer: This post was first published on 18th December 2020 and has been updated for the latest information, freshness, and accuracy.
