While the COVID-19-related restrictions are being lifted gradually, the threat of a third wave of the pandemic remains. In such circumstances, many people with limited finances are opting for a used car to avoid public transportation and practice social distancing. If you too are planning to finance used car, then keep these factors in mind before applying for a used-car loan.
Things to consider when taking finance used cars:
Type of Car
The first step is to figure out what kind of car you want and when it will be available with the dealer. If the used car you want is within your budget, you must go to the dealership and inspect the vehicle’s interior and exterior.
Once you have decided on your budget and the car, start exploring the financing options. Most financial institutions readily finance used cars. Also, many online vehicle aggregator platforms have tie-ups with various financial institutions. Borrowers may explore these options before deciding on a lender.
When determining the value of a car, there are numerous factors to consider. One must check the user profile, the number of kilometres driven, location of use, modifications in the car etc. You must understand how the car’s price is determined by keeping all of these aspects in mind. A vehicle’s valuation plays a crucial role in determining the loan amount.
Before finalising the amount of finance used car, the borrower must consider and compare the loan amount, repayment tenure and interest rate with different lending institutions. Choose the financial institution that offers high loan value, lower rate of interest and flexible repayment options.
Check the Documents
Before moving ahead with your buying decision, check for all the important documents. The set of documents include the vehicle’s registration certificate, insurance paper, No objection certificate (NOC) in certain cases, and pollution under control certificate (PUCC). If any of the above-mentioned documents are missing, the financial institution will reject your finance used car application.
As second-hand car loan interest rates are higher when compared to new car finance, it makes sense to pay off the debt as quickly as possible. This will assist in lowering the overall interest burden. Therefore, inquire about foreclosure and par prepayment fees and terms with the financial institution.
Features of used car finance:
Some of the features of used car finance are as follows:
High Loan Amount
Although the fund amount for used car loans varies from one lending institution to another, most financial institutions finance used cars for up to Rs 50 lakhs. Also, the maximum loan-to-value (LTV) of a second-hand car is 90 per cent. However, you may find a financial institution that offers 100 per cent financing on used cars.
The loan amount depends upon several factors such as the age of the car, its condition, applicant’s profile etc. If you are planning to take a loan for a used car, choose the lending institution that offers the highest loan amount.
The maximum repayment tenure for a used car loan is five years. However, depending upon several criteria, financial institutions may offer repayment terms beyond five years. Also, many lenders offer flexibility in loan repayment terms.
Several financial institutions charge minimum or no fees on the loan foreclosure or loan part prepayment. The flexibility in the loan repayment enables customers to plan their budget wisely and avoid missing their monthly loan instalments. Therefore, do consider the flexibility feature while choosing the lender.
Unlike other loan forms, a second-hand car loan does not require a huge compilation of papers. You do not need to put as much effort as you would for a business loan or loan against property to avail funds.
The only thing you need when you are about to finance used car is vehicle documents, income proof and KYC. Almost the entire process of getting a second-hand car loan can be completed online.
The loan application form is the sole piece of document that needs to be submitted at the lender’s branch office. Once the lender is satisfied with the submitted documents, they will quickly approve your loan application.
Affordable Interest Rate
Although interest on pre-owned car loans is slightly higher as compared to new car loans, it is still cheaper than various other forms of unsecured loans.
Unsecured loans are offered based on the customer’s profile. However, in finance used cars, financial institutions hypothecate the car leading to lower interest rates as compared to unsecured loans.
When it comes to getting a second-hand car loan, you have a lot of options. Finance used cars have several features and benefits.
However, remember to borrow only as much as you can afford to repay and make your EMI payments on time. By following the above-mentioned guidelines, you can purchase a used car on finance without any difficulty.