As per a recent report, India’s second-hand car market is flourishing and is predicted to reach USD 70.8 billion by 2030. It has generated significant revenue and is anticipated to grow at a CAGR of 14.8% between FY2021 and FY2030.
Resultantly, the steep growth of the second-hand car market has driven the demand for second-hand car loan. However, to make the borrowing effectual, borrowers should be well-versed with the ins and outs of the credit option.
5 Key Things You Should Know Before Availing A Second Hand Car Loan
Individuals looking forward to availing second-hand car loan must factor in the following things to make the borrowing effective:
- Prevailing interest rate: The first thing borrowers should look at before availing of the credit advance is the second hand car loan interest rate, which varies from lender to lender and significantly impacts the EMIs. The interest rate depends on credit history, vehicle type, borrower’s profile, existing financial obligations, etc. The used car loan interest rate is usually a tad higher than the new car loan interest rate.
- Loan tenor: Most lenders offer a repayment tenor of five years on a used car loan. Borrowers should opt for a loan tenor per their financial capabilities. Opting for a longer tenor will reduce the EMI burden; however, borrowers will end up paying higher interest. On the other hand, opting for a shorter tenor will help reduce the cost of borrowing.
- Loan amount: Additionally, borrowers should also settle for a financier offering a high quantum loan. Lenders generally sanction a loan amount that is 70% to 80% of the car’s market worth, and the remaining amount is to be paid as a down payment. Moreover, lenders scrutinise borrowers’ credit history, eligibility, car condition, age, and likes.
- Eligibility criteria: Meeting eligibility criteria is the foremost thing before applying for an old car loan. Here are the following eligibility criteria that borrowers must adhere to:
- Applicants must be Indian residents.
- Individuals should fall within the age bracket of 21 and 67 years.
- Second-hand car loans can be availed for private cars only.
Borrowers must also adhere to the primary qualifying factors like CIBIL score, income status, repayment capability, etc. Additionally, in the case of a pre-owned car loan, lenders even scrutinise a car’s condition and age.
- Proper documentation: Besides adhering to the set of eligibility criteria, borrowers must keep the following documents handy to apply for a second-hand car loan-
- KYC papers
- Car registration certificate and insurance copy
- No Objection Certificate (NOC)
- Pollution Under Control Certificate (PUC)
- Bank statements and salary slips
Lenders can disapprove loan applications if borrowers are not able to transfer car registration to their name. However, if borrowers find the documentation and other terms of second-hand car loans stringent, they can count on alternative second-hand car financing options like personal loans.
A personal loan is the most sought-after loan option as it has no-end use restrictions. Borrowers can use it for funding both personal and professional expenses. Financing a second-hand car with a personal loan can prove effective in many ways.
Availing personal loans for a used car will help borrowers receive a sizeable loan principal at nominal interest by meeting simple eligibility criteria and submitting primary documents. In this regard, knowing certain ways to get the best personal loans will help borrowers minimize the cost of borrowing.
Since personal is a collateral-free borrowing option, the disbursal process is faster. Knowing how the disbursal process for a personal loan works, applicants will be able to plan the borrowing effectively.
However, availing of personal loans can also prove counterproductive if the borrower is unaware of its particularities. Hence, an individual should know the common mistakes to avoid while availing of a personal loan for used cars.
Furthermore, leading financial institutions to extend exclusive pre-approved offers on financial products like personal loans, business loans, credit cards, etc. These offers streamline the application process further and reduce the hassles of documentation. Intending borrowers can check their pre-approved offers by submitting their names and contact details.A second-hand car loan is an effective financial means to turn one’s dream of owning a car into reality. However, borrowers can also look for personal loans for used cars depending on loan terms, affordability of borrowing, disbursal time, documentation, and likes.
Read Also: Learn the Process to Get a Loan for a Pre-Owned Car