India has become the number one market in the world for pre-owned cars. Most Indians are purchasing a used car by availing of second-hand car loan or finance. This article highlights points that must be considered while taking a loan to purchase a second-hand car.
India has a vibrant market for second-hand cars – this is evident from the fact that in 2018-19, businesses worth Rs 1 lakh crore was done in the used car market. Earlier the used car market used to grow at around 10% to 15% every year. However, over the next three to four years, volumes are expected to double. The pre-owned car market is driven by rising aspirations and easy availability of finance for a second-hand car.
Buyers find it convenient to take a second-hand car loan when purchasing a used car. A loan is easy on the finances, and a loan with a low-interest rate will not burden your daily finances. If you are among those who are considering taking a loan for a used car, then here are some important things to look out for:
Longer Turnaround Time for Approvals:
Loans for used cars take longer to be processed by lenders. Firstly both buyer and seller must agree about the affidavit to transfer car papers in the name of the buyer. Secondly, the bank scrutinizes the registration certificate as well as insurance documents. These must be transferred to the buyer’s name. This would take around 4-5 days compared to just a single day taken to process loans for new cars.
Interest Rates and Loan Amount
Depending on the age of the car, the interest rates can vary between 10.5% and about 18%. One can use online aggregators to compare interest rates offered by different lenders on second-hand car finance. Usually, banks offer about 80% to 85% of the car’s value. Other financial institutions, such as NBFCs could offer, even more, making the loan even more budget-friendly and convenient.
Tenure of loan
Lenders offer tenure of five to seven years. Tenure of the second-hand car loan could also be influenced by the age and condition of the pre-owned car. Buyers must avoid purchasing used cars which are more than five years old. In some cases, the lender might even cancel the loan, as the owner is most likely to spend on repair costs and high maintenance.
Documentation is critical when it comes to purchasing a pre-owned car. Apart from the buyer, the lender will also verify all the papers as well as evaluate the car independently – which would depend on certain internal parameters. Only after scrutinization is the loan for a used car sanctioned.
The seller of the car should ensure that car insurance is renewed. If the vehicle’s insurance is not renewed, then a lender might refuse to sanction the loan. It could also occur if the registration certificate RC) is not in the name of the seller.
Once you consider all the above points, then the process of securing second-hand car finance becomes smoother for the buyer. However, there is one factor that gets largely ignored – the trustworthiness of the lender. A financial institution which has been in business for hundreds of years will offer greater flexibility and loan amounts suited to your requirements.
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