5 Things to Know Before Borrowing a Pre-Owned Car Loan
The need for personal transportation is at an all-time high, but everyone in India may not be able to afford a new car. Pre-owned hatchback cars are the ones in maximum demand due to the affordability factor. As per the Frost & Sullivan report, pre-owned/second-hand car sales stood at 3.8 million units against 2.6 million for new vehicles in the financial year 2023-24 and are estimated to increase to 8.2 million.
Another common reason many people prefer to buy a pre-owned car is the easy availability of used car loans. If an individual doesn’t want to make the entire payment in one go or if the buyer does not have the required money, they can opt for a pre-owned car loan.
Several lending institutions and non-banking financial corporations (NBFCs) have started affordable pre-owned car loans to serve the emerging second-hand car market in India. It made it even more affordable for people to own a private car. Buyers can get up to 95% financing against used car loans. Used car loans range from Rs. 50,000 to 10 Lakhs and can be approved within 20 minutes after completing required car inspection formalities.
5 Crucial Things to Know Before Borrowing a Pre-Owned Car Loan
Avoid a car that’s too old or fancy
Getting a pre-owned car loan can make buyers go for a fancy car. For example, they may want to buy a 10-year-old BMW available at the cost of a new Honda City. It might seem alluring, but such temptation may be more harmful than good.
Also, buying a pre-owned car that is not older than three to five years is good. Lenders can provide second-hand car loans for cars not older than ten years. Still, buyers should prefer buying a newer car over a three to the five-year-old car. Otherwise, maintenance and service could become difficult. One needs to prepare a budget and buy a car that fits into it.
Must Read: Things to Consider Before Buying a Used Car
Sanctioned loan amount
It is an excellent option to buy a second-hand car against a second-hand car loan if the buyer doesn’t want to pay the whole cost in one go. You should know that you need to make a down payment to buy your car. You should know that lenders approve the car’s market value as the loan amount based on its evaluation methodology rather than the actual value you need to pay to the seller. If the lender approves the loan of 95% of the car’s value, the buyer needs to pay the remaining amount from their pocket. Suppose you have finalised a pre-owned car at Rs. 5 lakhs, but your lender evaluated the value at Rs. 4 lakhs, the lender can sanction the loan amount up to Rs.4 lakhs.
Eligibility and documentation
The eligibility determining factors of lenders for second-hand car loans are the same as for a new car loan. Lenders look at the borrowers’ age, monthly income, CIBIL score, etc. Additionally, they consider the age and condition of the car in the case of a used car loan. For documentation for a second-hand car loan, lenders need basic documents – PAN card, Aadhar number, voter’s ID card, salary slips, registration certificate (RC) of the car, and its insurance copy.
Pre-owned car loan interest rate
Generally, second-hand car loan interest rate is determined based on the car’s age, type, and make. Loan- tenure and amount are also considered. The risk concerning used cars is higher than new cars. Therefore, the Used car loan interest rate is generally higher than new car loans. The loan tenure ranges between twelve to sixty months which is flexible enough to fit loan EMIs in your budget. To reduce the interest cost, opt for a short-term loan.
Time to disburse loan
A second-hand car loan takes more time to disburse than a new car loan as lenders need to check several vital aspects. They check the hypothecation status of the car if there is a loan on it, pending police cases, etc. They also need to evaluate the car’s condition. These are time-consuming processes. However, it doesn’t mean buyers keep waiting for a month to avail of loan credit. It may take a maximum of a week to transfer your loan amount.
Thus, a pre-owned car loan can help buyers immensely to own a car. Choose the best-suited used car loan at favourable terms with renowned non-banking financial companies (NBFCs). Call us at 1800 102 1616 today to speak to a Muthoot Capital used car loan representative today.