Consider these factors before opting for a used car loan

A person who recently got his driving license may feel over the top and must have already started evaluating which car to buy? Should one consider taking a car loan, or how much money can I spend currently and so on?

The reality is that not everyone can pay for the amount required for the car loan or purchase that car that costs above Rs 8 lakhs. However, a better option is that a person can go for a good second-hand car which can be brought by availing a used car loan.

Currently, one can opt for used car loans at an attractive interest rate with a repayment option up to a tenure of seven years. The interest rates range from 9.50% to 16.25%,  depending on banks and financial institutions. Further, many lenders also offer a loan up to 100% of the car’s value.

One important point to note is that used car loans often have a higher interest rate than new car loans, as there is greater uncertainty about the car’s worth, and lenders have also witnessed that the used car borrowers’ default on their auto loans more frequently. Further, a low cibil score can also lend you a high-interest rate on the used car loan.

Today, most banks and non-banking financial companies are offering used car loans to salaried and self-employed individuals.

What are the features and benefits of the used-car loan?

-The loan amount may be smaller than that of a new car loan. As a result, your monthly instalments will be minimal.

-You get the benefit of a long repayment payback period.

-Certain banks and non-bank financial companies NBFCs provide 100% funding.

-The loan application process is straightforward and may be completed entirely online.

-As compared to a new car, the insurance prices and depreciation rates are also cheaper.

-There is a minimum amount of paperwork that must be presented.

-Certain banks and non-bank financial companies provide flexible payback options.

What documents are required?

The list of documents required while availing of the used car loan includes the application form, car valuation report, and passport-size photographs.

Further, your identity proof includes Aadhaar card, driving license, PAN card, passport, or voter’s identity card.

For address proof you can submit your ration card, passport, LIC policy, voter’s card, electricity bill, or an aadhaar card.

You may also require your income proof, including your profit and loss account statement, balance sheet, Form 16, salary slip, and bank statements.

What are the eligibility criteria?

The salaried employees’ age limit is between 21-65, and they should be earning at least Rs 15,000 per month. You should be employed for at least one year in the current working organisation. For self-employed individuals, the age limit is between 25-65 years, and they must make a profit of at least Rs 1.5 lakh in a year. Further, they are required to be in the same line of business or profession for at least three years.

 Things to keep in mind

-Conduct extensive research to find a lender that offers a used auto loan with cheap interest rates and a suitable term. Numerous banks and non-bank financial companies (NBFCs) offer favourable interest rates on used car loans.

-One should go for an online application process, as it helps in saving time.

-Maintain a file of pertinent documents. Any delay in providing the paperwork will result in a lengthier processing period for the loan. Choose a reputable lender to expedite the loan process.