Loan For Second Hand Cars: Here’s How You Can Get it Easily

Did you know, you can get a vehicle loan to buy a used car very easily? Here’s how it’s done.

used car loan

That’s true, you may utilise a loan to finance the purchase of a second-hand automobile. However, there are a few things to look at before applying for such a loan. For example, you should inquire about the lender’s willingness to grant a loan for a used automobile. The lender must be willing to finance the used automobile you are acquiring. Some lenders, for example, would not finance second-hand automobiles older than three years.

Here’s how to acquire a pre-owned automobile loan.

1. Pay a visit to the lender

To apply for a pre-owned automobile loan, go to a lender’s website or a branch office, either online (through the lender’s website) or offline (via the lender’s branch office). Also, do your homework before applying for a pre-owned loan to receive a better interest rate. Check out the lender’s online marketplace for used vehicle loans for discounts on a variety of used autos. For example, you may check out HDFC Bank’s pre-owned automobile loan area on their website, as well as State Bank of India and ICICI Bank. To receive a loan to buy a used automobile, some lenders may need you to put down a 20-30% down payment.

“Most banks and non-banking financial organisations (NBFCs) provide loans for the purchase of secondhand or pre-owned vehicles. The terms and conditions, as well as the fees, differ from one lender to the next. Only a few lenders will give you up to 100%, while the majority will only lend you up to 80%. As a result, you must have the margin money on hand.” Bank interest rates are expected to be lower than those offered by NBFCs.

For example, State Bank of India’s pre-owned automobile interest rates ranges from 9.2-10.5 percent, while HDFC Bank’s is 13.75-16 percent. Interest rates for pre-owned auto loans start at 15% for an NBFC like Tata Capital. (Rates are accurate as of September 22, 2020. These rates are subject to change.)

2. Complete the pre-owned vehicle loan

Discuss the loan’s specifics with your lender, including the amount you’re qualified for, the rate of interest, the processing charge, the loan’s duration, and your equivalent monthly payments (EMIs). If you think you might wish to prepay or foreclose the debt in part or in full, you should inquire about prepayment fees with the lender.

3. What’s the difference between a new and a used vehicle loan?

Loans for used cars often have higher interest rates and lower loan-to-value (LTV) ratios as compared to new car loans. As the loan amount for used vehicle loans is also ascertained by the lender’s value of the used car, the loan amount could be substantially lesser than the price given by the car seller. In addition, while used car loans can have a loan tenure of up to 5 years, the ultimate tenure will be determined by the vehicle’s age.

It is simpler to obtain a loan with a lower LTV ratio hence you must make a larger down payment when purchasing the vehicle.

4. Send in your paperwork

To allow the lender to complete your loan application, you will need to provide documentation. The following is a list of the documents you’ll need to give the lender:

  • Photo identification with evidence of age (like PAN card, Aadhaar card, passport, driver’s license)
  • 3 passport-sized photos and a signed application form (Varies Bank to Bank)
  • Proof of residence: Valid passport, voter identification card, driver’s licence, postpaid utility bill (gas and electricity bills), updated passbook or bank account statement, notarized and recorded rent agreement
  • For the past few months, below banking details of salaried/self-employed individuals are required:

If the candidate is a paid employee:

– Salary slips from the previous three months

– Documents such as Form 16 or income tax returns (ITR)

If the candidate is self-employed, the following criteria must be met:

– Income computation over the previous two years using the balance sheet and profit and loss account.

– ITR papers from the previous two years.

– Business evidence includes, among other things, a registration certificate and a service tax registration.

The following are key factors that a pre-owned automobile buyer should be aware of in order to have a loan approved by the lender.

Please ensure that all original paperwork are present with the seller before purchasing a used automobile.

If the lender’s hypothecation is noted on the Car Registration Certificate (Car RC), the seller must return the loan, obtain a No Objection Certificate (NOC) from his banker, and share the NOC with you.

Check to see whether the vendor has any outstanding e-challans. If this is the case, check to see if it has been paid before selling the automobile to you.

If you’re buying an interstate automobile, ask the seller to arrange for a NOC from the state of registration so you may re-register the vehicle after receiving the NOC.

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