Gone are the days when you had to queue outside car showrooms to buy a second-hand car of your choice. With the coming in of companies like Cars24, OLX (via Cash My Car) and CarDekho along with its portfolio Gaadi, the car market is organized like never before. You get to choose from a wide range of vehicles at affordable prices. Moreover, these online marketplaces for buying and selling used cars are tied up with numerous financial institutions that provide second-hand car loans at attractive interest rates. These institutions are lenders that avail loans for both small and big cars, irrespective of whether they are new or used.
It is not difficult to find lending institutions providing second-hand car loan in India. Used car loans are available in a range of 8.5-17 percent. Lenders fund up to 95 percent of the car’s insured declared with loan tenure extending up to seven years. Both salaried and self-employed intended borrowers can apply for the loan.
Necessary Facts About Second-Hand Car Loans:
Before availing a used car loan, it is essential to take care of specific essential considerations. Knowing them ensures a smooth and hassle-free loan application and subsequent approval. These include:
- Eligibility Criteria: Like any other kind of loan, these loans are not available to one and all. There are specific eligibility criteria involved in the loan application process that one needs to be aware of. Loan terms and conditions vary for salaried professionals and self-employed loan applicants. Several factors including the net income in hand, number of employed years, previous loans taken and CIBIL score matter. Since rules are different for used and new cars, it is important to know if your choice of lender is involved in the second-hand car finance business.
- Value Of The Car: You must not ignore car valuation as the loan process has a lot to do with the final price of the vehicle. You may either scan various car selling and buying websites, following a customer-to-business (C2B) model, to compare prices of similarly used cars. Alternatively, you may determine the estimated value of your vehicle based on factors like its present condition, the number of kilometers driven, the model of the car, wear and tear, maintenance history and number of times it has changed hands. Brand value matters though one cannot ignore the scratches and dents on the car. Moreover, the car must pass the inspections drafted by the state regulations. If the car looks worn out due to continued rough use, it will draw a lower value. Check if the car is overpriced when compared to its value before deciding to apply for the loan.
- Loan Amount: You cannot avail the entire loan amount equal to the car’s value. Lenders usually avail 70-80 percent of the valuation amount assessed by the loan officer during the survey. However, some intended borrowers, instead of taking multiple loans, take a personal loan that includes the car loan amount. This paves the way for making the down payment of the car loan too, thus, relieving you from having to pay from your savings or current account.
- Interest Rate: With multiple lending institutions dealing in second hand car loan, borrowers benefit from numerous interest rates. Increased interest rates mean more expenditure on your part, thus, causing a dent in your savings. Ranging between nine and 20 per cent, you may borrow from your choice of lender availing loans at the lowest interest rates.
- Loan Tenure: Lenders offer a loan tenure depending on the age and model of your car. Used cars loans are available for roughly five years or more. However, if your choice of car is too old, then lenders may limit the loan repayment period.
- Added Charges: Besides the loan interest charges, one must investigate the added fees charged by borrowers too. These may include processing fees ranging between Rs. 200 and Rs. 5000. However, during festive seasons, many lending institutions waive off the processing fees charged on second-hand car loans. Though processing fees are minimal, a lot depends on your choice of lender. Assessing processing fees at the initial stage will lower the burden of the loan in the long run.
Required Documentation: The valid documents are essential just like in any other loan process. Relevant documents necessary to avail car loans include identity and address proof documents like PAN Card or Aadhaar Card, bank statements showing income over the past five months, salary slips of previous three months and relevant car documents.
Author- Vidhi Verma