To own a car is every Indian’s dream. It is also like s status symbol for many. About two-thirds of India’s population belongs to the middle–income category, and 70% Indian population is youths, both of which find it difficult to buy cars of the latest make, model, and technology. It has up-lifted the pre-owned car market in the country tremendously. According to an estimate, the used car finance business is less than $2 billion currently and may go as high as over $10 billion by the end of 2021. Used car loans have made it possible for everyone to have a four-wheeler at their doorsteps.
What is a used car loan?
It is a loan that you can avail from banks or NBFCs to purchase a pre-owned car or a second-hand car. Many car owners sell their car after using it for many reasons, like buying a car of the latest design and model, showing depreciation in the accounts book, raising money, etc. Such cars come at lower prices and are generally in good shape. A used car loan helps you to buy one such vehicle at an affordable price.
Things to consider while availing a used car loan
Here are a few important tips that you must consider before choosing the right used car loan for you.
- Fix your budget
You should fix an amount you are willing to spend on the used car before applying for the car loan. It is essential because you will have to make the provision for the loan EMI from your existing monthly budget. This may lead to the reallocation of funds to different items in your monthly expenditure. You will also have to manage the down payment amount from your pocket. It requires pre-planning and fixing the budget before selecting the car.
- Selection of the car
You might have your dream car waiting for you but make your selection of the vehicle wisely. Lenders offer a higher interest rate for an old model’s vehicle or are not in perfect shape. Hence, select a car in good condition, only a few years in use, and have less run on the roads.
- The Loan Amount you wish to borrow
It mainly depends upon the price of the car you want to buy, the down payment you are ready to make, and the general condition of the vehicle of your choice. Lenders usually approve 70% to 80% of the valuation amount as a loan. You must try to get the maximum loan amount to cover your car’s price by selecting a vehicle of a good condition and through tactful negotiation with the lender.
- Loan Tenure
The maximum loan tenure that you may get for a used car is five years. It is after the careful appraisal of the lender’s vehicle concerning its age and general condition. The car that would require a lot of repair and maintenance fetches less loan amount and short tenure. A long tenure also means less EMI and a smaller dent on your pocket.
- Your loan eligibility
You must fulfil all the lender eligibility criteria like you must be a resident of India, 18 years or more of age, must have a source of income and documents to prove it, and should provide all the necessary documents and valid proofs.
- Loan Interest Rates and Processing Charges
All lenders offer used car finance at different interest rates. It varies according to the car’s selection, your credit score, and your down payment capacity. Therefore, it is essential to compare the interest rates and other loan terms of all the lenders and then select the one that offers the best deal. You can use the online loan EMI calculators available on the loan portal of all the lenders. Another important aspect is the processing fees and other charges. It is generally 1% to 2% of the total loan amount and increases your total repayment amount.
Choosing the best finance to buy a used car needs you to do a good amount of research of the available loans in the market and to keep in mind these tips before zeroing down on the one. Your wise decision can lend you a good deal at attractive terms and conditions.