Buying a new car, whether for personal use or your business, requires significant funds. But if you’re facing financial stress, purchasing a used car is still a viable option!
You could even apply for aused car loan to finance the pre-owned vehicle of your choice. Not only do you benefit from not paying a large amount upfront, but the increased purchasing capacity also lets you go for better car models.
Now, getting a loan can be a confusing process, especially if this is your first time applying for one. To reduce the confusion, here’s a list of things you should know before applying.
1. Loan amount
When you get a used car loan, the lender only finances a specific percentage of your vehicle’s cost. Generally, it is 75% of the car’s value. Only a few lenders offer 100% financing for a pre-owned car, while most have their lending specifications based on the applicant’s age, income, and employment stability.
Additionally, the loan amount offered also depends on the value of the used car and its model. For instance, a lesser-used car has more value and will get you a higher loan amount sanction.
2. Used car loan eligibilityand documentation
Like the loan amount, eligibility conditions also vary across lenders. The main factors lenders check include age, income, work stability, and credit score. To do this, they verify documents like identity proof, address proof, income proof, salary slips, vehicle registration certificate, bank statements etc., before approving your loan application.
When considered together, these factors indicate your loan repayment ability and your financial management skills. Naturally, if you have a stable, well-paying job, and a credit score above 750 points, you are deemed more eligible for a loan.
Additional Read: All You Need To Know About Used Car Loans
3. Used car loan interest rates
Interest rates for used cars are usually on the higher end, as there is a higher risk involved as the car’s history cannot be ascertained for sure. This also means you’ll need to pay a larger EMI amount. So, choosing a lender offering a competitive interest rate becomes even more crucial.
To get a lower interest rate, you can try increasing your CIBIL score or opting for a loan co-applicant. Doing so can assure the lender that you’re less likely to default on payments. Hence, lenders are more likely to offer lower rates.
4. Used car loan tenure
The tenures for these loans are relatively short. They range anywhere between 12 to 60 months from the time of loan disbursal.
Remember, the longer the tenure, the more second-hand car loan interest rateyou have to pay. So, if you have the means, choose a shorter tenure. The EMI amounts may be higher, but you will save funds that would go into paying interest.
Additional Read: What Are the Requirements to Get a Used Car Loan?
Over to you
Now that you know what the pre-owned car loan is all about, choosing the right lender is the next step. Turn to a trusted lender like Tata Capital and get loans at competitive interest rates and flexible EMI options. You can also plan your repayments using our used car loan EMI calculator. Get in touch today!