How to Get a Used Car Loan?

The pre-owned vehicle market is huge in India with 5^th largest market in the world selling 4.4 million units annually.

This market also registers an annual growth of CAGR of 17.50% which is amazing. Currently, the used car market is valued at $23 Billion as of 2022.

A car purchase requires financing and there are many banks and NBFSs which provide used car financing loans.

Whether you are seeking a specific model of car or want to fit a luxury car into your budget then you can get the used car and get it financed.

In this guide, we’ll find out how to get a Second-hand car loan, the documents required, the process of applying for the loan, and much more.

But first, let’s understand the used car’s advantages and disadvantages to ensure you make the right decision to purchase the car.

Used Car Advantage

The following are the advantages that make a Used Car a good purchase:

• A used car is cheaper as compared to a brand new one making it more economical for you to purchase. As soon as the car rolls out of the showroom, the car’s value drops, and as time passes, the cost of the car will significantly depreciate which makes it a good time for you to buy the car from the owner.
• The best thing about used cars is the variety in the market, within your budget, you’ll find many cars which are less driven and are cheap also, if you search well, you’ll even find luxury cars.
• With a used car, you can negotiate with the owner or dealers and ensure, you have a good deal on the car. Sometimes, the negotiation margin is 10-15% less than the quoted price which makes it an amazing deal for you.
• Used car has Low to no registration fee, You can simply visit the dealer or the owner and select the best car suited for your need and further continue with the process for registration of the car in your name, it is that easy.
• You can finance a used car with the banks at nominal rates making it even more affordable for you.

Used Car Disadvantage

The following are the disadvantages of the used car that you should always think about before making the purchase:

• A used car may come with faulty mechanics or electronics which may not be visually visible at first but later on, may become a problem and the cost of repairing that may impact the economical factor of the Used car purchase
• The interest rate offered on a used car is higher as compared to the new car which makes the overall cost of getting the new vehicle higher or equal to that of a new vehicle
• With a new car, you’ll get additional benefits which makes the new car purchase more exciting and worry however purchasing an old car may not give you that joy For example- a New Car comes with a warranty by the manufacturer but the old car may and may not come with this benefit.

Eligibility for Getting Used Car Loan

The following are the eligibility for getting a used car loan:

Salaried Individual

• The minimum age for applying for a used car loan is 18 years and the maximum age for applying for a used car loan is 65 years.
• The minimum salary of the individual must be at least Rs.15,000/- a month
• The individual must be working in the organization for at least 1 year
• A good Credit score is required preferably above 700 to get a good offer on the loan

Self-Employed Individual

• The minimum age for applying for a used car loan is 18 years and the maximum age for applying for a used car loan is 65 years.
• The income of the individual must be at least Rs.1.5 Lakhs annually
• The individual must be in the same line of business for 3 years minimum
• A good Credit score is required preferably above 700 to get a good offer on the loan

Tips for Selecting a Used Car

The following are the tips that you should follow before buying a used car:

Vehicle Paper Check

Check the vehicle’s paper thoroughly whether the vehicle’s hypothecation has been done or not, if not then you would need the NOC from the previous owner’s bank account that financed the purchase. Check the RC, Insurance, pollution, and other important vehicle papers thoroughly.

Vehicle History

The vest’s first step whenever checking a vehicle to buy as used is to check for the vehicle’s history i.e., it must have a detailed service record from the company or reputed mechanic. This ensures that the vehicle is well-maintained and has a low chance of major defects

Physical Inspection

You’ll have to make an appointment with the dealer or individual you are buying from and do a physical inspection of the vehicle. Make sure to check for any structural damage by looking at the pillar of the vehicle and the front and back main body bars. Strictly avoid the vehicle that went through an accident, Some scratches and dents here and there are fine but not major accidents that made the vehicle’s structure collapse.

Professional Help

If you do not what to look for or how to check a vehicle then the best way is to get a professional mechanic’s help. He/she will be able to correctly check the vehicle’s performance, and condition and provide you with a detailed report on whether to buy it or not.

Traffic Challan Report

Another major thing that you’ll have to check is whether the vehicle has a traffic challan pending with the traffic department or not. You can do that easily by visiting the online portal of your state’s traffic challan. Just enter the details of the vehicle and you’ll find the details on the traffic challan pending.

Insurance

Check for the insurance’s validity of the vehicle and find out whether you’ll have to get it insured or when you’ll have to insure it. This will save you the extra cost of car insurance.

How to Apply for a Used Car Loan?

The following are the steps that you can follow to apply for a used car loan:

• If you visit a used car dealer and select a car then he/she will facilitate the entire process for you which is easy for you but if you are purchasing it from another person then you’ll have to visit the bank branch along with the documents mentioned below
• Fill out the used car loan application form along with the documents mentioned below
• After filling out the application form, you’ll have to submit the application form along with the documents to the bank representative
• You can now further discuss and negotiate the interest rate and loan amount
• It will take some time and a physical inspection by the bank of the car to finalize the loan amount
• After completing this process, the loan amount will be sanctioned and you’ll be able to purchase the vehicle from the owner
• As soon as you get the loan approval, you’ll also have to begin the RC Transfer process
• By visiting your RTO and submitting the RC Transfer documents along with the fee associated and then it will take a month or two for your RC to come to your home address

Documents Required for Used Car Loan

The following are the documents required for a used car loan:

• Application form
• Passport-size photographs
• Car valuation report

Identity Proof: (Anyone)

• Aadhaar Card
• Passport
• Driving License
• Voter’s ID
• PAN Card

Address Proof: (Anyone)

• Voter’s ID
• LIC Policy
• Electricity Bill
• Aadhaar Card
• Driving License
• Ration Card
• Passport

Income Proof: (Anyone)

• Profit and loss account
• Balance sheet
• Audit sheet
• Form 16
• Salary slip
• Bank statements

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