Mr Shetty wanted to buy a vehicle for his son. But he was not sure whether to get a brand new car or a pre-used one. Keeping in mind that his son was an inexperienced driver, he decided to take a loan to buy a used car. But Mr Shetty was confused about what kind of a loan to take. The options included a regular car loan, a used-car loan, and a personal loan. So, he visited the Tata Capital Online car store to get the answers to all his queries.
Financing a car: The different available loans
If you are buying a new car, you can get attractive car loans from many lenders. But when buying a used car, you have to opt for a used-car loan or a personal loan. A used-car loan is a popular financing option for used cars. Take a look at the table to understand what differentiates a used-car loan from the new-car loan.
|NEW-CAR LOAN||USED-CAR LOAN|
|Available for||Brand new cars||Pre-owned cars|
|Loan amount||Up to 100% of the value of the car||Up to 90% of the value of the car|
|Tenure||Up to seven years||Up to five years|
Eligibility criteria for new-car loan and used-car loan
Your eligibility for a used car loan can depend on whether you are a salaried employee or a self-employed professional. For new-car loans for salaried individuals, you must have an annual income of at least Rs. 2.5 lakhs. For those who are self-employed, this may drop to Rs. 2 lakhs. The loan tenure, in this case, could be anywhere between 12 to 60 months. But this could also go up to 84 months for high-end cars.
In the case of used cars, a salaried individual must earn at least Rs. 3 lakhs per year. He must have work experience of at least two years. Of this, one year must be with the current employer. What if you are self-employed or own a business? Then your annual income should be Rs. 2 lakh. You would also have to be doing business for at least three years.
Why opt for a used-car loan?
More and more people are considering a used-car loan when buying a pre-owned vehicle. The main reasons for this are:
- Credit score: The biggest advantage here is the credit score. Many people who buy used cars do so because of financial constraints and low credit scores. It is difficult to get personal loans with a low credit score. But you could still get a used-car loan if you are fairly above the average level.
- Economical: As the used car’s value is lower, the used-car loan principal is much lower than a new car loan principal. The loan is available for a shorter duration too. This makes it easier for you to manage the loan and your other expenses.
- Wide availability: These days, many used-car vendors offer loans. The Tata Capital Online Car Store is one such platform.
Getting a used-car loan
In today’s times, it is easy to get a car loan. You can complete the entire process online making it convenient and quick. You can also choose a flexible repayment option. This may reduce the burden of Equated Monthly Instalments (EMIs). After all, the loan should not become a liability for you.