Having a car is a dream for most, not just because of its practical benefits but also because it is a status symbol of sorts. In case you are unable to afford a brand new car, you can always purchase a pre-owned or second hand car at a much lower price.
There are a number of loans available for this purpose as well.
Let us examine the features and benefits of a pre-owned car loan.
A pre-owned car loan is a secured loan that is provided for the purchase of a second hand/used/pre-owned car. This loan is provided by most banks and is quite affordable as this is a secured loan. The repayment term can range from 1 year to 7 years and upto 90% of the car value is usually provided as loan although certain lenders such as HDFC Bank can even provide loans that are equal to the full value of the vehicle.
Given below are some of the salient benefits and features of a second hand car loan -
Pre-owned car loans are available for most types of used cars including SUVs, MUVs, sedans, etc.
Most lenders offer financing for upto 80% to 100% of the car value
Since this is a secured loan where the used car serves as collateral, interest rates are lower when compared to that of personal loans
Repayment tenures of upto 7 years are offered. However, this can vary from one lender to another
Most lenders offer a hassle-free application process which can mostly be completed online
The documentation requirements are quite minimal and in most cases require only proof of identity, address, and income
Salaried and self-employed Indian residents can avail a pre-owned car loan. However, their age, income, and other criteria will determine the amount of loan provided
Your loan can be approved within just 30 minutes if all your documents are in order and you’ve met the eligibility criteria
The eligibility criteria for a used car loan will vary from one lender to another. However, the basic eligibility criteria is given below -
All salaried and self-employed individuals can avail a pre-owned car loan
Applicants will need to earn a minimum of Rs. 1. 25 lpa to be eligible for a used car loan
Borrowers must be between 21 to 57 years old generally to get a second hand car loan
Higher your credit score (CIBIL score of 750 and above), greater are your chances of getting an affordable loan
Certain lenders also require applicants to have worked at their organization for at least 1 year before applying
Given below are some of the general documents required for a second-hand car loan -
Proof of Identity such as Aadhaar Card, PAN Card, Valid Indian Passport, etc.
Proof of Address such as Aadhaar Card, Valid Indian Passport, Utility Bills, etc.
Proof of Income such as salary slips, bank statements, etc.
Car valuation report, car insurance reports (if valid)
Please note that the documentation requirements will vary from one lender to another.
Given below are the fees and charges and used car loan interest rates -
|Description||Fees and Charges|
|Interest Rates||Upto 15% per annum|
|Foreclosure Charges||Upto 6% of principal outstanding|
|EMI Bounce Charges||2% of unpaid EMIs|
|Processing Fee||Upto 3.5% of loan amount|
|Repayment Term||Upto 7 years|
Please note that the fees and charges will vary based on the lender.
Here are some of the top lenders in the country offering car loan for used cars -
|HDFC Bank||7% onwards||Upto 7 years|
|IDFC Bank||10.49% onwards||Upto 7 years|
|ICICI Bank||9% onwards||Upto 7 years|
|Axis Bank||7.40% onwards||Upto 5 years|
|Bank of Baroda||12.75% onwards||Upto 7 years|
If you plan to avail a used car loan then here are a few things to keep in mind -
While the interest rates for used car loans are lower as compared to personal loans, they are still higher than that of new car loans
Check the car to be purchased thoroughly. Take it for a test drive, ensure that all documents are in place, and check the vehicle history as well
Ensure that the registration certificate and insurance is transferred to your name once you purchase
You may have to provide a downpayment in order to get a second hand car loan
Purchasing a used car is a great option in case you cannot afford to buy a new car. Not only are these cars a lot lighter on the wallet, you can easily find used car loans to help finance your purchase.
Ans: A used car loan is a secured loan as the vehicle in question will serve as collateral.
Ans: Yes, most lenders require a downpayment to disburse pre-owned car loans.
Ans: The interest rate for a pre-owned car will vary based on the lender, your credit score, value of the car in question, etc. The interest rate for pre-owned car loans usually start at around 7% per annum.
Ans: Having a high CIBIL score is important to get a loan. Your CIBIL score determines your creditworthiness and higher the credit score, better is your chance of getting a loan. If your CIBIL score is below 700, your loan application could get rejected or the interest rate imposed will be very high.
However, you can still avail a personal loan from Money View as long as your CIBIL score is 600 and above which can be used for any purpose.