Meaning and How to Apply for One in January 2023 – Forbes INDIA Advisor

Cars are definitely among the things that can be classified as both necessities and luxuries. Buying a brand new car or even a used model can take a big chunk out of your budget and it can take years to save up for it. This is where loans come in.

You have two main choices when it comes to getting a car loan in India. The first is a regular car loan and the second is a used car loan. If you’re looking for the latter, here are the basics of used car loans and how you can apply for one.

Related: Car Loan Interest Rates

What is a used car loan

A used car loan, also known as a used car loan, is a type of loan that aims to help a person get a good used car. This involves making monthly payments instead of a lump sum payment, which is a slightly more budget-friendly way to copy a vehicle.

However, used car loan in India is subject to lower loan amounts. Note, however, that this is not a bad thing. Unlike other loans that come with high value assets, used car models are priced lower than new ones. This means you can expect lower monthly payments in the long run.

Pre-Owned Car Loan vs. New Car Loan

If you are new to loans, then the different types of loans may confuse you at first. For example, let’s talk about a used car loan and a new car loan.

Now the main difference between the two is the type of car or vehicle that you will be able to get. A used car loan comes with a used car, while a new car loan comes with a brand new model. The former also has a lower amount of money. This makes it a good choice for those who want a car but still don’t want to spend money every month. The latter, on the other hand, will suit people with higher financial capacity.

Pre Owned Car Loan Against Personal Loan

Both a used car loan and a personal loan can be used to finance a car. However, a personal loan has a more comprehensive approach for borrowers. While the former is strictly limited to getting a second-hand car, the latter can be used for all kinds of personal needs, hence the name. You can apply for it if you need money for investments, personal expenses and the likes.

The bottom line is that it can be difficult to apply for a personal loan if your main goal is to own a car. If this is the case, then it will definitely be more convenient to settle on a used car loan.

How a used car loan works

The used car loan process begins with a financial institution. It can be either an informal lender or a corporate bank.

The institution will then evaluate your application by evaluating the specific used model you want to have, your budget, current source of income and other financial information. Then expect them to come up with a financial plan consisting of interest rates and required monthly payments to name a few.

If you agree to the terms, then you will receive the loan money to buy your car. Your only responsibility after that is to keep up with the monthly payments.

A used car loan doesn’t really stray too far from other types of loans. It works the same way as there are elements like loan amount, monthly payments, interest rates and more.

Used Car Loan Specifications in India

First, note that used car loan specifications in India will vary from bank to bank.

However, for reference, you should expect interest rates to range from 7.50% to 15.50%. It’s unusual for rates to go higher than that, but it’s not entirely impossible, especially if you’re looking for a high-end financial institution.

As for the loan period, the maximum duration can go up to seven years or 84 months. This is a relatively new rule in the lending industry, so you should limit your expectations to just 72 months. Similarly, there are banks that allow repayment for more than seven years. It will all come down to the terms and conditions of a financial institution regarding used car loans in India.

Pros and cons of a used car loan

A used car loan may seem like the perfect choice, but remember that it also has its pros and cons.

Here is a list of some of the advantages you can get by choosing a used car loan:

  • Longer repayment period
  • Lower monthly payments
  • Lower insurance costs (due to the used condition of the car)

Disadvantages, on the other hand, include the following:

  • Relatively higher interest rates
  • A high down payment is required
  • Defective used cars can hurt your pocket more than help

To make sure you get only the professional side of the loan, be sure to invest time in choosing the right vehicle, financial institution and general terms and conditions to work with. You may also want to consider working with financial advisors if you have the budget to spare.

How to Apply for Pre Owned Car Loan in India in 2023

Applying for a used car loan in India is actually easy. Here are the steps you need to follow:

  1. Visit the bank you plan to work with. Make sure you do your research beforehand on the best possible financial institution for your needs before visiting a branch.
  2. Submit the required documents including the duly filled application form. The application form will be provided by the bank itself after you visit them. Some also provide a downloadable version on their website for convenience.
  3. Wait for the bank officer to assess your requirements and needs. This usually won’t take long as long as you’re sure you’ve met the loan requirements.
  4. Meet with the accountant to discuss the terms of your used car loan. This is the final step where the accountant/s will talk to you about the required monthly payments, interest rates, terms and conditions and the likes.

Make sure you listen to every condition given during the last step to avoid agreeing to unreasonable loan terms.

Factors that affect a used car loan

Getting a used car loan will only be easy if you are qualified. However, below are some things that you should pay attention to before applying for the said loan:

  • Credit rating
  • History as a borrower (if it is not your first time)
  • Source of income
  • Guarantors
  • Employment history

Expect it to be difficult if you have an adverse experience as a borrower, employee and the likes. Credit rating will mostly play a big role.

Eligibility Criteria for Used Car Loan in India

Since the required documents will vary depending on the financial institution you work with, we will focus on walking you through the qualifications for a used car loan in India. See the following list:

  • You must be between the ages of 21 and 65; Minimum 25 if self-employed)
  • Monthly income should be INR 15,000 or more; INR 1.5 lakh per annum if you are self-employed
  • The applicant must have been in their current job for at least one year; The business must have been in existence for 3 years or more if you are self-employed

These are the general qualifications set for Indian used car loan applicants. Additional may be added depending on the bank.

Bottom row

A used car loan refers to a financing method that is reserved for used cars. Applying for this will allow you to have a used but still working car at a significantly lower price. This is mostly compared to brand new models.

Keep in mind, however, that like most loans, a used car loan works through monthly payments and interest. This means that this does not come with a specific price and will vary depending on the financial institution you work with.

Getting a used car loan in India does not come with any major requirements. As long as you’re 21 and over that can pass the required income for the model you’re looking for, then you’re good to go. You can also prepare a checklist to ensure that you can get a used car loan without any problems.

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