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In India, banks and Non-Banking Financial Companies (NBFCs) make up the majority of lenders and offer used car loan financing for the purchase of second-hand or pre-owned cars. When looking for auto loans to buy a used car, the make and model of the vehicle you choose are quite important.
Lenders take the automobile’s age and whether the model has been discontinued into account before accepting a 2nd hand car loan application. The combined age of the vehicle and the loan term in the event of a used automobile loan cannot exceed 8 to 10 years. Finding the necessary funds to purchase an older vehicle becomes more challenging. Invest in a newer, no older than 2-3 years old car model.
Car Loans for Used Vehicles in India
Once you have chosen the precise brand and model of the car you wish to purchase, search for used auto loan offers from the best banks in the country. Visit a trustworthy third-party website to examine different used car loan financing offers, then select the one with the lowest interest rate, no processing fee, the right loan term, and flexible repayment options.
After deciding on a reliable lender who guarantees little paperwork and quick loan disbursement, confirm the bank’s or NBFC’s requirements for car loan eligibility.
Loan Eligibility for Used Cars
Any salaried or self-employed person between the ages of 21 and 65 with a reliable source of income, a decent credit score, and a steady job can apply for a 2nd hand car loan. Each lender sets their own criteria for loan terms, interest rates, and loan amounts for used cars.
Used cars have a low resale value, hence, lenders charge higher interest rates for used car loans than for new car loans. For a lower interest rate, you can always bargain with the financial institution. In addition, a used automobile’s insurance premium is greater than a new one due to the high cost of maintenance and the lack of readily available automotive parts.
Must Read: How to buy used car?
What Is the Quickest Way to Purchase Used Goods?
- Ensure you have a legitimate and steady source of income
- You are able to provide evidence of your income
- Put down as much money as you can to avoid increasing financial interest rates.
- Recognize how financing works at a dealer.
- Improve your credit rating before applying.
Things to Consider Before Obtaining A Loan for A Used Car
To avoid unpleasant shocks later on, know your budget, loan terms, and interest rates. Verify that all paperwork is in order, including the insurance and registration certificate. When you finally decide to opt for a used car loan financing and receive the vehicle, don’t forget to have the title changed to your name and have hypothecation added to your financier.
Interest Rates for Used Car Loans
Due to the aforementioned factors, buying a used car comes with risks for both the buyer and the lender. As a result, used automobile loans have slightly higher interest rates than new car loans.
Currently, 2nd hand car loan rates are variable and range from 11 to 16 percent. New car loan rates, meanwhile, begin at a significantly lower 7.75%. Additionally, there is a processing fee that ranges from 1 to 3 percent of the car’s worth.
Loan Terms for Used Cars
Choosing loan terms for used cars is another difficult decision. The vehicle may have been in operation for a while. Loan terms for used cars are also influenced by the vehicle’s quality. Nevertheless, because of how subjective these concerns are, most financial institutions and banks set a maximum loan term for used car loans.
Some banks only lend for used automobiles that haven’t been driven for a particular number of years or up to a specific number of years from the date of the first registration. Used car loan financing often has shorter terms than new automobile loans, which can last up to 7 years.
Final Takeaway
Having more used car loan financing choices makes it possible for people to purchase used cars for less money. However, as with any other loan, maintaining good credit is more important than anything else. No matter if you’re buying a new or used car, go for a 2nd hand car loan to the extent you can afford to repay and make all of your payments on time.
