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A car is nothing short of a blessing, the concept of having a private vehicle has not only become a choice but a necessity in these modern time. As people continue to upgrade their vehicles with newer models. The manufacturers are on the race to introduce newer cars now and then to withstand the market competition. On the contrary, the life span of these cars is decreasing year by year. This has led to the development of a used car market in India. Second-hand cars are preferable for those who are buying cars for the first time and don’t want to own the car for a longer period. It is likely that you might require funds to support your purchase of a used car. For the same, you may have to approach a financial institution who will value your car and provide the loan amount. Sometimes you may get second hand car finance up to 85% of the car value. Usually, the used car loan interest rate is lower than the brand new car loan if you maintain a decent credit score. A survey is done to assess the size of the second-hand car loan market published the information that the number of used cars sold was 3.5 million. Meaning, the number of used cars purchased is almost 1.2 times the number of brand new ones.
Factors to consider while choosing a second-hand car finance
Interest rates: You can get a used car loan interest rate of 9.15%, much lower than the usual personal loans. Some lenders are charging even lower rates like 8.70%. This will apply to those who have a high credit score. Second-hand car finance from certain financial institutions will fetch you flexible terms of repayment that encourages everyone to rely on it.
Loan amount: Various factors govern the final amount you get from the lenders. There are so many financial institutions that lend up to 70-90% of the value of the car. Moreover, the lenders fix the loan amount of the car based on the valuation process of the lenders or the insured declared value. Then the amount you will get in hand will be much lower. Suppose if you have decided to buy a car for Rs. 5,00,000 and the valuation officer fixes a value of Rs. 4,00,000 for your car, the lenders will give you a loan up to 80% of Rs.4, 00,000. You will have to shell out 1.8 lakhs as the bank is ready to lend you an amount of 3.2 Lakhs. That’s why you have to go through every detail to find out the exact amount you will be able to get second-hand car finance and the amount you have to arrange from your sources.
Loan approval process: A second-hand car loan will take at least a week to get approved. Go through the fine print for the exact process for applying the second-hand car finance and the fee for the same. The main factors that decide the processing fee are the loan amount the lender is going to approve, the term of the loan and the down payment.
Repayment tenure: It is another main thing you have to consider before you borrow from a particular financial institution. The repayment period is flexible according to the repayment capacity of the borrowers. In the normal case, it ranges from 1 to 5 years. If you decide to foreclose the loan by paying the outstanding amount, you can do it. But the institution will charge a small amount as foreclosure charges. Give it a clear thought and choose the amount as well as tenure to arrive at the most favourable EMI that helps you to pay off the loan amount comfortably.
To summerise, people prefer used car not only because of the lesser cost but also the fact that the resale value of a new car falls down drastically, whereas when it comes to used ones, the depreciation is not as intense. By being vigilant, you will be able to grab a great deal on barely used cars, where either the seller is planning to get a new vehicle or is planning on moving. Generally, the used car loan interest rate is low. This makes second-hand car loans attractive and useful for buyers.
