Have you test-driven many cars to choose your dream car but cannot proceed further due to a shortage of budget? Most of the cars (new & used) bought in the Indian market are financed through various banks and financial institutions. Therefore, if you are thinking to buy a preowned car, getting a Car Loan can help you purchase the car.
Right from choosing the best lender to applying for a loan, there are a lot of factors involved in getting a Pre-owned Car Loan.
So, here is a step-by-step guide on Pre-owned Car Loans in India.
• Finalize your budget
The first thing to do before applying for a Used Car Loan is to finalize a budget that will help you narrow down the cars you will consider buying. After finalizing your budget, you can go ahead and select the car that suits your needs and requirements.
• Know the Pre-owned Car Loan interest rate
The interest rate of a new Car Loan is usually lower than Used Car Loans. Lenders generally provide loans up to 85-90% of your pre-owned car’s value and in the case of a new car, even 100% finance is sometimes offered. If you keep these things in mind, you can make these terms work for you rather than hinder you. With the lower price of the pre-owned car, the actual value for applying for a Pre-owned Car Loan could work out to be more affordable than a new Car Loan in the long run.
• Check the loan details
Most buyers often make hasty decisions and pay higher EMIs each month. However, managing your money smartly and intelligently can help you save your hard-earned money. Therefore, before visiting a pre-owned car dealer, one should examine their lending options and compare the interest rates offered by various lenders of banks and financial institutions.
Another frequent mistake made by buyers is that they are attracted to "low cost" EMI deals, but they pay much higher EMIs ultimately. Using a loan calculator can give you a good idea of the expected repayment loan amount. Please note that this may vary from lender to lender as each lender offers Pre-Owned Car Loan at different interest rates. Thus, it is best to focus on the total cost of your car by calculating the amount involved in the dealer's fees, taxes, insurance, down payment, interest, and loan repayment amount.
Once you have decided which vehicle you are ready to bring home, the next big step is to apply for a Car Loan. With many banks and financial institutions, getting a Pre-owned Car Loan has become easier than ever. So, if you have set your heart on a pre-owned car, you can proceed by checking the eligibility of your Pre-owned Loan and comparing the interest rates offered by different lenders.
Different lenders have different eligibility criteria for customers to get a Pre-owned Car Loan. So, the first step in getting a loan is to check if you are eligible to opt for it or not. This can be done by visiting lenders’ websites. Most lenders have usually the basic eligibility requirements for a Pre-owned Car Loan such as the age of the applicant, minimum age requirements, residential and employment status, details of the vehicle, etc. For example, if you fall into the category of a salaried person, you may need to work for at least two years to qualify for a Pre-owned Car Loan.
• Financing agency, loan amount, and loan term
Interest rates for Pre-owned Car Loans vary depending on the bank or NBFC you choose, so it is important to choose your loan provider wisely. Lenders offer loans for both new and pre-owned vehicles. When it comes to financing pre-owned cars, interest rates are usually between 10 % to 17.5%. Different financing agencies charge different processing fees, which adds to your overall cost.
Therefore, consider the overall cost of the loan when choosing the lender. Another factor on which your interest rates are based is your credit score. A higher credit score may result in a lower interest rate. SO, it is advised to maintain a good credit score.
Once the financing agency is determined, plan your expenses to determine which loan you want to get and how long you can repay your loan. If you have already withdrawn some of your savings for a down payment, you will need a lower loan amount. You should also be careful when choosing the term of your loan as it will affect the overall cost of your car. Generally, the loan term comes in brackets of 1 to 7 years.
Once you have selected your financing agency, loan amount, and tenure, the next step is to provide them with relevant documents to avoid rejection of your loan application. Again, different financing agencies have different documentation requirements for Pre-owned Car Loans. However, there are some essentially required documents:
- Properly filled out the loan application form
- Identity proofs like- Aadhar, PAN, or voting card
- Telephone Bill / Electricity Bill / Aadhar Card / Ration Card / Life Insurance Policy / Passport / Voter ID Card / Driving License etc. as proof of address.
Latest pay slip, Form 16 / ITR slip / Bank statement / Firm / Company account balance sheet, etc. as proof of income depending on the type of employment.
In addition, the lenders may require photographs of the applicant, invoice/rate list, proof of signature verification, credit score, etc. to obtain a Pre-owned Car loan.
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