In 2018, over 4 million used cars were sold, and the sale of pre-owned vehicles exceeded that of new cars. It’s also predicted that owing to the rise in demand for used cars, the country’s pre-owned car segment is set to become the third-largest market in the world by 2021. Additionally, according to an article published by Livemint, not only has there been growth in the used car market, but lenders have witnessed a rise of 12–18% in used car loans as well. So, if you are planning to buy a used car and are looking for financing through a used car loan, there are certain aspects of the offering that you must be aware of.
The value of the vehicle depends on many factors such as the condition of its exteriors and interiors, how many people have owned it, the number of times it has been transferred and mileage. Valuation, in turn, plays an important role in determining the cost of the loan. While valuation is just one of the aspects, there are some other factors also that influence the used car loan cost.
Here are 4 crucial things you should know about used car loans before applying for one.
The tenor of used car loan depends on the age of the car
Most lenders offer a tenor of up to 5 years for used car loans; however, the vehicle’s age influences the tenor on offer. Typically, older cars with high maintenance requirements fetch you a loan with a shorter tenor. So, to be on the safer side, avoid purchasing cars that are older than 5 years if you wish to keep your monthly outgo minimal by opting for a long tenor. Further, note that some lenders may reject applications for car finance if the used car is more than 7 or 8 years old.
Lenders sanction the loan only if you have authentic documentation
To enjoy the benefits of used car loan, valid vehicle documentation is a must. This is because the delinquency in this market is particularly high and so, lenders follow strict approval protocols. Therefore, before purchasing a car, look for papers indicating the vehicle’s maintenance record, model, distance driven, service history, and ensure that it has a valid RC book.
Your credit score plays a major role in loan approval
Credit scores indicate your creditworthiness and repayment abilities to a lender. Hence, having an excellent credit score above 750 helps in getting instant approval. Moreover, an ideal score also gives you the negotiation power required to get a loan at a lower, more favourable interest rate.
Most lenders do not offer 100% car finance
Usually, lenders offer financing of up to 70–80% of the used car’s value and you will be required to make a down payment for the remainder. The value of the car will be decided by the lender’s inspector, after a thorough evaluation. However, if you apply for a personal loan for used cars, you get a sanction that’s large enough to cover the entire cost, eliminating the need for a down payment.
For instance, Bajaj Finserv offers a personal loan for used cars of up to Rs.25 lakh, which can comfortably cover the cost of many mid- and top-segment vehicles. Unlike conventional used car loans, you get access to a flexible tenor of up to 60 months and can even benefit from instant loan approval, once you qualify basis simple used car loan eligibility criteria. To qualify, you must be an Indian resident aged between 23 and 55 years, be employed in a reputed company and earn a sufficient amount each month.
Bajaj Finserv also extends to you Flexi Personal Loans, through which you can borrow from your sanction as per your need, restricting interest applicable only to the amount you’ve withdrawn only.
Now that you’re aware of the nuances of a used car loan and how a personal loan is better, note that you can apply for one right away. To enjoy this offering on customised terms, check your pre-approved offer online by sharing basic details such as your name and contact number.