A vehicle carries a lot of sentimental value in a country like India. Now, a car is no longer considered a luxury item and has become a necessity, especially during this global pandemic time. It is easier and safer to use a private car than travelling via public transport systems.

In this country, the second hand car market is humongous, with many novice drivers going for a used car first before investing in a brand new one. If you are a novice as well, buying a used car makes more sense as it will cost lesser and will fulfil your immediate needs.

The good news is second hand car loans are easily available in the market. If you are planning to buy one, you can easily apply for a loan, subject to eligibility terms. Once you have finalized the type of vehicle, it is time to hunt for the right lender for financing the used car.

Things to Consider While Taking Second Hand Car Loan

Selecting Right Vehicle

You must consider that a used car might entail higher maintenance costs. Also, lenders charge a higher rate of interest on second hand car loans when compared to new car loans. Get the car checked by a mechanic and check for its market resale value. Needless to say, it must suit your lifestyle, taste and end requirements. Go for a test ride and gauge the performance and safety features of the car. Ensure that you take the GST invoice and a NOC for inter-state registration from the seller.

Most importantly, do not decide in haste as it will be difficult to find a buyer in case you plan to resell it in future. Though it should suit your style, it should also be pocket-friendly and durable.

Type of Vehicle

Check with your financer the type of vehicle it finances. Some financial institutions refrain from granting second hand car loans for vehicles that are more than three years old. Additionally, the selected car must be in the list of approved cars of the lender.

Compare, Compare and Compare

It is the time to be price-conscious if you want to shop for the right deal. There are various online marketplaces for comparison, which will give you a brief snapshot of their current interest rates, tenure and eligibility criteria. Comparison is the golden key for bagging the right loan for you.

Budget

Typically, lenders finance 60% to 80% of the on-road price of the vehicle. For making the down payment, you would need to part with your liquid funds. Hence, do consider your budget before finalizing the deal. The amount of loan is based on the car valuation calculated by the lender, which might differ from the price given by the seller.

Repayment Plan

We understand your excitement about owning a car; however, do not consider taking a loanuntil you have a repayment plan in place. Calculate your monthly cash-in-hand after meeting other liabilities and consider the amount you can comfortably spare for the EMI. Unnecessary loans often lead to financial distress, attracting penalties and a drop in credit score due to default. Opt for a lender who offers flexible repayment terms.

Eligibility Criteria

Check with your financer about the eligibility criteria and see if you fit the bill. Common criteria for eligibility for a second hand car loan are good credit history, healthy credit score, stable source of income, minimum income, athe ge of the applicant (usually required to be 21 years) and the age of the vehicle

Other Loan Parameters

Do consider other loan parameters such as down payment, loan processing and foreclosure fee, and other hidden fees, since this comes with an additional financial burden.

Bear in mind that the condition of the car also makes a big difference. For an older car that requires higher maintenance, lenders will finance less comparatively.

Documentation

This is the most crucial aspect to be considered, as most lending institutions require proper documentation. Your seller might be required to transfer the title in your name before they can approve the loan. The RC and insurance papers and other papers, declaring the number of people the title has been transferred to, must be proper.

Disbursement Procedure

Disbursement processes vary from lender to lender and it might take time for your loan to get approved. If you need an instant loan, it would be prudent to apply online, especially to fintech companies that offer hassle-free loans with minimal documentation. Disbursal of the second hand car loan is also quick in such cases.

Interest Rate

It is easier to get the approval of a lender for a loan if you already share a relationship. For instance, choose a lender with whom you have an account with.

It would be wise on your part to check online marketplaces to compare interest rates to verify whether you are being offered a fair deal.

Also, a healthy credit score can give youthe power to negotiate for favourable terms. So, clean up your financial records by making timely credit card payments and meeting liabilities in time.

To conclude,

Most car dealers have tie-ups with top financial institutions that offer preapproved loans. While selecting a model, ensure that you do some homework based on the parameters mentioned above. Visit different car dealers, both traditional and non-traditional financial institutions, including private ones, which will help you arrive at the right decision. Lenders might still reject your loan if you do not fulfil their eligibility criteria. Well, start planning today if you are eyeing that car for a long time. A used car can be a great option to get a hang of driving. All the Best!