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ALL YOU NEED TO KNOW ABOUT USED CAR LOAN
The used car market in India has developed beyond recognition in the last few years, making second-hand cars a viable option for many people. Whether one wants a car to practice their driving skills on, is looking for a second car for their family, or if one just doesn’t have the budget to purchase a new car – there are many reasons why one may want to purchase preowned cars. Buying a used car has become more streamlined than ever, and unlike earlier, if one plans to buy a used car, they are no longer required to pay a lump sum amount for the purchase, as they can opt for a used car loan with ease to finance their second-hand car. Buying a preowned car is not only an affordable alternative to buying new cars, but it also comes with the convenience of travelling in a four-wheeler and allows you to save some money on the market price, depreciation, and even the insurance for the car.
If you too plan to buy a second-hand car, here’s all you need to know about getting a used car loan.
What is a Used Car Loan?
A used or second-hand car loan offers car buyers financial assistance for the purchase of a second-hand car. Rather than having to collect the full amount required for a second hand, people can take the assistance of an NBFC or bank to finance the value of the car in the form of a loan, which they can repay over a fixed period of time. The interest rates on a preowned car loan are used to calculate the amount that a borrower will be required to pay back in total over the loan tenure. While most types of used vehicles can be financed, different banks may have different criteria, like the maximum age of the car, whether it is imported, etc., that you may have to meet for your loan application to be approved. Some types of cars or the condition they are in may attract higher interest rates on car loans for their purchase.
Understanding Interest Rates on Used Car Loans
The interest rates for a used car loan may vary from lender to lender and are used to calculate the amount of money that the lender is charging for a used car loan. There are basically two types of interest rates for used car loans – fixed and floating interest rates. Whereas the applicable interest rate remains constant throughout the loan tenure when you opt for the fixed rate, floating interest rates change with market fluctuations. Fixed interest rates on car loans are generally higher than floating rates, but the rate that is offered also depends on various other factors like the age and credit score of the borrower, the amount of money being borrowed, the loan tenure chosen, etc.
Benefits of Applying for a Second-Hand Car Loan
Used cars cost less than new cars, so you can apply for a smaller amount as a loan.
It is easy to get even 95-100% of the car’s value financed.
With minimal documentation and competitive interest rates, a used car loan that suits your requirements is easy to find and avail.
Minimal documentation, quick approvals, and quick disbursals.
With numerous options available online, it is easy to find the best features, offers, and interest rates for a used car loan.
Eligibility for Applying for a Used Car Loan
Though the exact eligibility criteria for a second-hand car loan may vary from lender to lender, the basic requirements that an applicant should meet, include:
Age: Applicant should be between 21 and 65 years of age (age limit may vary with different lenders)
Income: Applicant should have a regular source of income and their monthly income should be more than the limit defined by the lender.
Work Experience: Applicant should have been employed for more than at least 1 year. For business owners, a minimum of 3 years of business existence is required.
Credit Score: Used to calculate interest rates for used car loans, a minimum credit score of 700 is required.
Age of the Vehicle: Some lenders require that by the time of loan maturity, the vehicle bought should not be more than 10 years old, while some do not approve loans for cars more than 3 years old.
Eligibility is a significant factor that is taken into consideration when it comes to calculating interest rates on car loans.
How to Apply for a Second-Hand Car Loan
Application: Once you have found a suitable loan offer and interest rates for your used car purchase, you can start the process online by filling up the application form on the lender’s official website.
Documentation: Submit the required documents for ID proof, income proof, address proof, signature proof, etc. You will also need to submit a copy of the car’s documents, like its RC.
Verification: Your documents and eligibility will be verified by the lender.
Sanction and Disbursal: The loan will be sanctioned and disbursed once your application has been approved.
Tips for Finding the Best Used Car Loan
Do some research to find the best offers and interest rates for a used car loan.
Look into your credit score, there are several ways in which you can improve the same and get lower interest rates on used car loans.
Understand what factors go into valuating a used car and try to find a suitable vehicle which can help you get the best loan offers.
100% financing does mean zero down payment but costs a lot in the long run. Consider the loan-to-vehicle value and how much a loan will cost you in the end before choosing a finance option.
Availing a second-hand car loan is the best way to go about buying a used car, but make sure you do not skimp on the research, so you can find the best loan offer for your purchase. Muthoot Finance, the no. 1 most trusted financial services provider, offers easy second-hand car loans, helping people realise their dream of owning their own car. Muthoot Finance offers up to 95% financing, competitive interest rates, and flexible repayment options for salaried as well as self-employed individuals. With simple processing, minimal documentation, and quick disbursals at Muthoot Finance, buying a second-hand was never easier.
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