It is considered to be a better option if you buy a second hand car when you are buying a car for the first time as it is less risky. People find it better to practice driving in an old or used car and then buy a new car when they are confident enough to take a new car out on the road.
A used car loan can be defined as a loan taken to buy a used or a second hand car which has been used by someone else before you. A car loan can assist you in buying a used car if you cannot buy the car by paying in one-go.
Eligibility to apply for used car loans are:
- Minimum 21 years of age(in case of salaried) and 18 years of age(in case of self-employment)
- Maximum 70 years(in case of salaried) and 75 years of age(in case of self employment) at maturity
- For salaried individuals, minimum net annual Salary of Rs. 2,40,000 p.a. for all approved car models and for self-employed individuals minimum net annual salary of Rs. 1,80,000 p.a. for selected models and Rs. 2,00,000 p.a. for others is mandatory.
- Income eligibility based on latest salary slip and Form 16
- If salaried, minimum of 1 year continuous employment and in case of self employment 3 years of employment in the same line of business is required.
Documents required for taking a used car loan:
- Application form
- Proof of identity
- Proof of address
- Age proof
- Income proof
- Bank statement
- Signature verification proof
- Pro-forma Invoice or Rate List
- Passport size photographs
Some important things to consider before applying for a used car loan:
- Health of a car: Most of the banks prefer lending money to the customer if the car for which the loan is being taken is less than 10 years old(at the maturity of the loan). The car should be in a good conditions and ensure that it will not require much repair to run it on road.
- Type of loan: If you have a good credit score, you may get an unsecured loan, otherwise you can take a secure loan by providing some collateral as a security.
- Loan tenure: The duration for which the loan is taken decides the amount of EMIs that you will have to pay. Smaller the tenure, larger the EMI you pay.
- Down payment: Before applying for the loan, you should also check how much amount can you pay as down payment. This amount decides how much amount do you need to take as a loan. In some situations, you may not have to pay the down payments at all.
- Interest rates: Interest rates charged by the banks are different for each bank. So before applying for the loan,you should compare the interest rates charged by different banks or other financial institutions to decide the best loan deal.
- Decide a budget: You should take a loan as per your requirements and affordability. You should not take loan more than you can repay. On the basis of the interest rate and the tenure of the loan, your EMIs are calculated. So decide the tenure as cautiously as you can.
- Dealer choice: You should talk to different dealers and compare the deals they provide you before finalizing anything. The more you compare,the better deal you will get.
- Service history: Before deciding which car you want to buy, you should check the service records of the car. It is better to take a car which has been serviced at authorized service centres.
- Transfer ownership: The seller of the car has to inform the RTO(Regional Transport Office) about selling the car within 14 days when the buyer purchases the car.
- Check the paperwork: Make sure that you have taken all the important documents from the seller like registration book, taxation book, invoice, PUC certificate and other important papers.
As mentioned above, before taking the loan, you should also compare different deals provided by different banks. Here is a comparison of a few banks that offer used car loans:
|Bank||Interest rate||Loan Amount||Tenure|
|HDFC||14.50% – 17.50% Fixed||80.00% of market value||5 years|
|ICICI||15.50% Fixed||80.00% of on-road price||5 years|
|Federal Bank||11.15% – 12.50% Fixed||75.00% of depreciated value||5 years|
|Central Bank of India||10.60% Floating||75.00% of market value||5 years|
|Andhra bank||10.00% Fixed||60.00%||5 years|
|Karnataka Bank||14.45% Floating||60.00% of market value||3 years|
|OBC||12.40% Floating||70.00%||3 years|
|Bank of Baroda||10.45% Floating||80.00%||3 years|
|Tamilnad Mercantile Bank||11.75% – 12.00% Floating||70.00% of market value||5 years|
|Bank of India||10.85% Floating||70.00% of market value||3 years|
|Union bank of India||12.80% Floating||50.00% of market value||5 years|
|Indian Bank||12.90% Floating||60.00% of market value||5 years|
|Kotak Bank||17.00% – 20.00% Fixed||90.00% of market value||5 years|
|Bank of Maharashtra||10.45% Floating||50.00%||5 years|
|SBI||13.05% Floating||85.00% of on-road price||7 years|
|PNB||11.20% – 11.70% Floating||70.00% of market value||5 years|
By comparing these and some other deals, you will be able to decide from where you should take the loan which suits you best.