Purchasing a used car is an affordable alternative to buying a new one. However, you may not always have sufficient funds available for your purchase. In this situation, a used car loan can be of great help. Such a loan is an excellent way to finance your vehicle without straining your savings. Here is a step-by-step guide on how to get a used car loan.
Before you consider applying for a used car loan, it's important to understand your financial situation. Assess your monthly income and expenses to determine how much you can afford to pay as an EMI (Equated Monthly Installment). Be sure to calculate your budget, taking into account the down payment and any additional costs like registration certificate collection charges, insurance, and maintenance. Checking your credit score, which can affect the interest rate you are offered, is also crucial. Interest rates on Bajaj Markets start from 10.50% p.a.
Once you know your budget, the next step is to explore different lenders. In India, several banks and financial institutions offer used car loans.
You can also start by checking with your bank or credit union. Many lenders provide car loans for used cars with flexible terms for your benefit. Compare interest rates, loan amounts, and tenure across various lenders. You can also check online used car loan application platforms, which allow you to compare multiple offers in one place.
Bajaj Finserv, a lending partner of Bajaj Markets, offers you a used car loan of up to ₹77 Lakhs. Interest rate starts from 10.50% with a repayment tenure of 6 years.
The amount you can borrow for a used car depends on several factors, including the car’s value, your income, and your credit score. Generally, banks and financial institutions provide you with up to 85-90% of the car’s value, leaving you with the responsibility to pay the remaining 10-15% as the down payment. In fact, on Bajaj Markets, you can finance up to 100% of your pre-owned vehicle's value with a car loan.
Make sure to use a car loan eligibility calculator provided by lenders to get an estimate of the loan amount you may be eligible for.
Before applying for a loan, it's important to understand the loan terms, such as the used car loan interest rate, EMI, and loan tenure:
Rate of interest: The interest rate for a used car loan can vary depending on the lender, your credit score, and the car’s age.
EMI: The EMI amount is the fixed amount you will need to pay each month.
- Repayment tenure: The loan tenure can go up to 6 years, and choosing a longer tenure reduces the EMI, but increases the overall interest you’ll pay.
Many lenders offer a pre-approval process that provides an estimate of the loan amount and interest rate you may qualify for. While pre-approval doesn’t guarantee final loan approval, it gives you a clearer picture of your affordability. Lenders typically consider factors such as ID proof, income proof, address proof, and your CIBIL score during the pre-approval process. Having a pre-approval can give you an advantage when negotiating with the seller, as it demonstrates that you are a serious and financially prepared buyer..
With your financing in place, you can start looking for a used car. You can visit car dealerships or explore online used car platforms. Be sure to assess the car’s condition, age, and previous ownership. When you find the right car, ask for the necessary documents, including the registration certificate, NOC (No Objection Certificate), and service history. Verify the car’s valuation, ensuring it matches the price you are being quoted by the seller. Remember to also take the used car out for a test drive so you can check its handling, comfort, braking system and engine performance. It is only after evaluating its condition on different roads as well as the functioning of its electrical components, should you consider going ahead with it.
Once you’ve found a used car that fits your budget, the next step is to negotiate the price. Car dealers often have some flexibility in pricing, and you may be able to get a better deal. Don’t hesitate to negotiate based on the car’s condition, market value, and any other factors that might affect its worth. If you're buying from a private seller, make sure all the documents are in order before agreeing to a price.
After finalising the car and its price, the next step is to apply for the used car loan. You can either apply online through a bank’s website, financial marketplaces like Bajaj Markets or visit the bank’s branch. Many lenders now provide online application processes for used car loans, making it simpler and faster to apply.
You’ll also need to submit necessary documents during your application:
Registration certificate of the used car
Insurance copy of the used car
Bank account statement for the last 3 months
ITR documents of last 2 years if self-employed
You can then apply for your used car loan online on Bajaj Markets by following these steps:
Input your basic information on the application page
Fill the loan amount you require and repayment tenure of your choice
Choose your loan offer from the options displayed on the screen
Upon submission and verification of your application, you will receive a call from a loan representative to process your application further
Before signing any loan agreement, ensure that you carefully review all the terms and conditions. Check for the interest rate, EMI amount, loan tenure, and any additional charges such as processing fees or documentation charges. Some lenders may offer flexible repayment options or the option of prepayment without penalties. Make sure you fully understand the agreement to avoid any surprises in the future.
After getting the used car loan, it is important to keep track of your monthly payments. Set reminders for your EMI due dates to avoid late payment penalties and a negative impact on your credit score. If you face any financial difficulties, contact your lender to discuss options like loan restructuring or payment deferrals.
Getting a used car loan is a straightforward process if you follow the right steps. With careful planning, comparison of lender options, and a clear understanding of the loan terms, you can successfully finance your used car. Whether you’re looking for the best second-hand car loan or a used car bank loan, the key is to be informed and prepared before making any decisions.
FAQs
What are the benefits of getting a used car loan?
Used car loans come with low interest rates starting from 10.50% on Bajaj Markets, making them more affordable. With such loans, you can purchase a car without depleting your savings.
What’s the difference between new and used car loans?
When you purchase a used car, its condition impacts the loan amount and its resale value. There is also a higher interest rate levied on used car loans as well as shorter tenures compared to new car loans because of the vehicle’s depreciation. Most banks do not offer such loans on used cars older than 8 to 10 years, making the purchase finalisation tougher.
Can I get a used car loan without a down payment?
It is uncommon to get a used car loan without a down payment, though few lenders do offer zero down payment loans. Fully financed loans generally depend on your income, lender’s policies and credit-worthiness. Most lenders may require you to pay 15 to 20% of the car’s value upfront.
Can I apply for a used car loan online?
Yes, you can apply for a used car loan online through most banks or financial institutions. The process is quick and convenient on Bajaj Markets.
What is the typical loan amount for a used car loan?
The loan amount typically covers up to 85-90% of the car’s value. The exact amount will depend on your credit score, the car’s age, and other key factors. On Bajaj Markets, up to 100% financing is available.
How does my income affect my used car loan application?
Your income plays a crucial role in determining your used car loan eligibility. Lenders assess your income to ensure that you can afford the monthly EMI payments. A higher income with a good repayment record can increase your chances of a fully financed used car loan.
What is an APR on a used car loan?
APR (Annual Percentage Rate) represents the total interest cost of the loan per year. It includes the interest rate and any additional charges associated with the loan.
How long should my loan term be for a used car?
The ideal loan term depends on your budget and preferences. Loan tenures typically go up to 6 years. A longer term reduces your EMI but increases the overall cost of the loan.
What should I do if I can’t afford my car loan payments?
If you're unable to make your payments, ensure to contact your lender immediately. They may offer options like rescheduling the loan or extending the repayment period.
What are the risks of getting a used car loan?
The main risks include higher interest rates, depreciation, and potential maintenance costs of an older vehicle. It’s essential to evaluate the car’s condition before committing to the loan.
Can I refinance my used car loan later?
Yes, you can refinance your used car loan later to obtain a lower interest rate or better terms, especially if your financial situation improves.
What if I don’t have a co-signer for my used car loan?
A co-signer can help you secure a loan with better terms. However, not having one is possible, but it may affect your eligibility or the loan's interest rate.
How do I shop around for the best-used car loan?
Compare interest rates, terms, fees, and eligibility criteria from various lenders. Use online platforms like Bajaj Markets to evaluate offers and choose the one that fits your needs.
Can I get a loan for a used car from a dealership?
Yes, many dealerships offer financing options for used cars. You can also obtain a used car loan from NBFC’s like Bajaj Finserv on Bajaj Markets. However, it’s important to compare these options with those provided by banks or other lenders to get the best deal.
