Buying a car is a dream come true for many. Used cars are an affordable alternative for budget buyers, especially with a used car loan. In fact, this may be the best time to buy a used car, thanks to the recent doubling of depreciation on cars bought before April 1, 2020. Industry watchers say that this will spark increased selling of cars by owners to get a good resale price.
interest rates on a second hand car loan can vary widely depending on the
age and physical condition of the car you choose to buy. You will need to put
in some amount of research to decide on the right one for your needs. Being a
secured loan, a car loan does involve collateral – the vehicle itself! However,
could it be used to finance your purchase?
The short answer: Yes.
Let’s take a look at some of the factors involved:
Lender retains title
The basic principle behind a collateral-based loan is that the lender is legally entitled to take over the pledged asset if the borrower is unable to repay the loan. In fact, the title remains with the bank you choose to get the loan from.
Terms and conditions
Consumers in most western countries can readily get a loan on used car by leveraging it as collateral. In India, most major banks and auto finance companies offer this type of loan, subject to certain terms and conditions. If you have an existing auto loan with a certain lender and need a top-up, you may be able to offer the used car as collateral. However, some banks do offer used car loans on third party auto loans as well.
Additional Read:- Top Benefits of Used Car Loan
For specific information, you can contact a dealer or auto finance provider.
How it works
Based on the current market price of the car, the loan provider will offer you a quote. Compare quotes from different providers to get the best possible offer for your needs. The loan process starts with a valuation performed by a representative of the bank or financial institution.
The valuer’s job is to determine a fair price based on the car’s physical condition such as engine, transmission and mileage. Depending on the age of the vehicle, depreciation is calculated that is used by the auto loan company to make you an offer.
The loan amount depends on its current market value, various terms and conditions and the overall risk profile.
Once your application for a loan on used car is approved, the lender becomes the holder of the title, which is also updated on the Registration Certificate (RC). This means that it cannot be sold to a third party until the loan is paid off in full.
Additional Read:- How different is the Indian used car loan industry from other countries
Is the interest rate lower?
You can negotiate for a lower rate of interest on a used car loan with the dealer. However, it depends on your driving history and credit score.
If you too wish to drive home the preowned version of your dream car, do so with an instant loan from Tata Capital. Make the most of their competitive interest rates and flexible used car loan repayment tenures.