Right from finding the perfect vehicle to scouting the best deals to choosing the right finance options, there are a lot of things to consider when you are planning to buy a car. Especially if you are in the market for a pre-owned vehicle. However, with the entry of several organised players in the used car market, things are becoming more and more streamlined. So, here are seven things you need to know about getting a used car loan in India.
Also Read: 7 Benefits Of Buying A Used Car
- Gone are those days when buying a used car meant you had to shell out the entire sum in one go. Now, you can simply get it financed as you would for a brand-new car. Several banks and financial institutions now offer used car loans, which can be procured directly or through listed banks or NBFCs of an organised used car seller.
- Find the right car that fits your budget. Finalise a budget for your purchase and search for the best options available. Buying a pre-owned vehicle is a game of patience, and if you wait long enough you might even get your desired car that might have been out of your budget as a brand-new vehicle. Once you find it check it physically for any damages or issues, we have already told you how you can do it yourself.
Also Read: Things You Need To Do At The Time Of Buying A Used Car
- Try and get the correct valuation of the car you have zeroed upon. Depending on factors like make, model, and kilometres driven, among others will help you find out the right value of the car which will be important while applying for a used car loan. While organised players will already have a valuation of the car, several online portals offer a valuation calculator. Ask for the insurance records which will help you find if there were any previous claims on the vehicle.
Also Read: Buying A Used Car vs A New Car – Pros And Cons
- Once you have the value of the vehicle is decided, the next thing to do is select the finance options that best fit your need. Now all lenders will ask for a percentage of the car’s total value to be paid as a down payment, similar to when you buy a new car. While in some rare cases a bank might offer you 100 per cent financing, generally most financial institutions offer a loan of around 80 to 85 per cent. In some cases, it might even go as low as 60 per cent. The remaining amount will be your down payment.
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- Next comes the rate of interest or ROI. Different financial institutions will offer different rate of interest on car loans and it may vary depending on vehicle type, credit history, customer profile and more. Currently, the rate of interest on used cars starts at around 11 per cent and can go up to 18 per cent per annum, which is slightly higher compared to the ROI on new cars which starts around. 7.5 per cent. While some banks will offer a fixed rate of interest, others will offer floating ROI.
Also Read: Insurance For Used Cars: Things You Should Know
- The next thing you need to consider is the loan tenure. Typically, the loan tenure on a used car is much lesser, at 3 to 4 years compared to a new car which might see a tenure of 5 to 7 years. This is mainly because the loan amount itself is less in the case of the former. Sometimes, the price difference between the two could be as big as over 50 per cent.
- Now, a combination of the loan amount, rate of interest and loan tenure will decide what will be your equated monthly installment or EMI. Because the rate of interest on a used car is higher compared to a new car it’s best to pay off the loan as early as possible, so try to select a shorter tenure. This will help to reduce the overall interest burden. Also, try and find a loan option that doesn’t include an early loan payment fee.