Misconceptions About Used Car Loans That You Should Stop Believing

Mar 02, 2017

Riccha Dubey moved to Mumbai when she was 25. Not a huge fan of local trains, Richa decided to invest in a used car. She could easily apply for a loan and get a used car of her choice. After all, how difficult could it be? But as she started contacting dealerships and looking at options she realised that there were several things she had missed out on. Here are some mistakes Riccha realised that she had made:

"Lenders don't prefer to give loans for used cars"

This is a very common misconception that people have about used car loans. It does not make a difference to your lender if you purchase a used car or a new car, as long as it is in a good condition. There could be a restriction on the loan tenure, depending on the condition of the car. But with several banks and NBFCs offering highly customised used car loans, picking the right one for your needs will be a cakewalk.

Related: 5 Things you need to do before applying for a used car loan

"Only apply through the car dealership from where the car is being purchased."

If you are purchasing your car from a dealership, chances are that they will have tie ups with banks. While it is a good idea to evaluate the benefits of availing the loan through your dealer (sometimes they offer robust discounts as an incentive), it is not wise to stop looking for other options. Do your homework, get quotes from several lenders and then make a decision.

"Negotiating interest rates is impossible"

Both used car loans and regular car loans function within the same framework. Hence the rules for the two are not very different. You can easily negotiate interest rates to get a deal that suits you the best. Of course, at this stage too, research is of utmost importance.

Related: 5 Steps to purchasing your first used car

"I don't need address proof"

If like Richha, you too want to purchase a car in a city where you don't permanently reside, according to government records, you will need some alternative proof of residence. This could be your rent agreement, electricity bill etc. If you lack any of the above documents, you will be unable to purchase a car, let alone avail a loan. So, ensure you have all the required documents.

So, stay away from these common misconceptions and do your research before you jump to any conclusions. Happy loan shopping!