Yes. You heard it right. You can easily get a car loan to buy a used/second-hand/pre-owned car of your choice. With this loan facility, buying your dream car has become much easier. Additionally, a used vehicle comes with benefits such as no need for security, lower price, slow rate of depreciation, and lower insurance cost. A pre-owned car loan allows an individual to have ownership of a used car with financial benefits. Now you can choose the car of your dreams and not stress about the finances.
Here is how to get a loan to buy a pre-owned car:
- Compare interest rates across lenders: First and foremost, check which financial institutions offer loans to buy a used car. You can either check online, by visiting the company’s website, or offline by visiting its branch office. Once that is done, conduct proper research before applying to get a better rate of interest. It is often suggested to compare different pre-owned car loans across a wide range of lenders. Usually, lenders expect you to pay 20% to 30% of the down payment and loan the rest. It is an important aspect hidden from nobody that interest rate makes a huge difference on the total amount that has to be repaid. Choosing the wrong lender at high interest rate with adamant terms might burn a hole in your pocket. Hence it is very important to choose a lender who offer and communicate the charges upfront.
- Finalise the pre-owned car loan: Once you have shortlisted the lender, get to know everything that you are eligible for, like the amount of the loan, the tenure for repayment, the rate of interest, processing fee, and the EMIs you will be paying monthly. Also, ask for prepayment charges if you want to prepay or foreclose the loan completely, or partially. Some lenders charge a penalty in case of foreclosure of loans. You should be clear on the finances that you can afford basis the eligibility and then choose from the variety of cars available in your budget.
- Loan amount: Pre-owned car loans come with lower-loan-to value (LTV) than loans for purchasing new cars. It also depends on the valuation of the used car. Most of the car lenders tend to provide 70-90% of the car’s evaluated price through their own process or based on the Insured Declared Value (IDV). Let’s understand this better. Suppose you plan to purchase a second-hand car of Rs. 5 lakh, and a lender values your car at Rs. 4 lakh and is willing to lend 70% of that value, then you will only get a loan of Rs 2.80 lakh (70% of 4 lakh) and will have to make a down payment of the remaining Rs 2.20 lakh. It is also suggested to make a higher down payment so that repaying the loan is not heavy on the pockets later on. It allows one to breathe later on with less interest to be paid and lower monthly instalments. It allows you to have a surplus through which one can save or invest better.
- Apply for a loan and submit the documents: The application process is usually simple and can be done online. Here is the list of documents you will need, to provide the lender:
✔ Photo ID with age proof (like PAN card, Aadhaar card, passport, driving license)
✔ Signed application form with 3 passport sized photographs (Varies from lender to lender)
✔ Residence proof: Valid passport, voter ID card, driving license, post-paid utility bill (gas bill and electricity bill), updated passbook or bank account statement, notarised and registered rent agreement
✔ Income Proof for a salaried individual: last 3 months’ salary slips, ITR, bank statements
✔ Income proof for a self-employed individual: Balance sheet, profit & loss account, audit sheet, ITR of last 2 years
- Take possession of your car: Once the lender approves the loan, the seller will receive the money in his/her bank account within a few hours. At the same time, you can pay the remaining down payment amount to the seller and get possession of the pre-owned car. Also, one thing to keep in mind is that the ownership of the car will lie with the lender till the total amount has not been paid by the borrower. However, this in no way restricts the borrower with the usage of the car.
Poonawalla Fincorp makes your loan application experience effortless, easy, and convenient. Thus, it helps you fulfil your pre-owned car loan requirements and helps you rejoice with your family without holding back.