[In-depth] Thinking of buying a used car? Steps to apply for a loan

Easy access to loans and fast payouts make used cars popular. The pandemic has also caused a surge in demand for personal vehicles as people prefer to have their vehicle over public transport to ward off potential health risks. Buy one used car also makes sense for first-time buyers as it allows them to own a decent car at an affordable price. It also allows them to hone their driving skills. To make used cars more appealing to consumers, dealerships also offer a trade-in of your existing vehicle with a used car.

Most banks allow used car loans to their customers. However, the terms and conditions of a used car loan are different from those of a new vehicle. car loans.

Used car loan vs new car

A new car loan is generally offered at a lower interest rate than a used car loan. The maximum repayment term for a new car loan is generally up to 7 years, while the repayment term for a used car loan depends on the age of the car. Generally, lenders allow a maximum repayment period of 5 years. Some banks give used car loans for vehicles up to 3 years old, while there are no such restrictions on a regular car loan. The loan to value ratio (LTV) of a used car loan is generally lower than that of a new car loan. It is therefore crucial that you know the steps to take to obtain a used car loan and the applicable rates. Looked.

Select your car

There are two ways to buy a used car. The first is to find direct sellers, i.e. car owners who want to sell their car directly to the buyer, and the second is to buy a vehicle from dealers or used car dealerships. . Some banks offer used car loans at a reduced interest rate if you buy them from an authorized car dealership. When you buy a used car from your direct contact, you must take care of all the paperwork and the transfer of ownership of the car; on the other hand, if you buy it from a certified car dealer, they take care of all the paperwork. The certified car dealership also helps in securing the loan from its associated lenders.

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Zero in your budget

It is always better to opt for a car loan that you can easily maintain. Before buying a used car, it is always best to determine an amount that you are comfortable paying.

Assess the current condition of the car

You need to buy a car in good condition that requires minimal maintenance. Your car should fit your budget, but at the same time, it should be strong enough for the long term. If there have been recurring problems with the car, it makes sense not to buy it. Therefore, before buying a car, check every detail of the car to get the best deal.

The age of the car

One of the most important factors you may need to consider before picking up a used car is to check the age of the car. Ideally, you shouldn’t take a car that’s more than seven years old, as the potential for repairs and replacements might be higher. The value of the car decreases over time. Lenders also consider the age of the car before granting a loan.

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Contact your lender

After selecting a car, you need to contact the lenders from whom you want to take the loan. You can compare different lenders based on the interest rate offered on the used car loan, loan margin required, processing fees, repayment term provided, etc. Check the lender’s eligibility standard and applicable conditions. The interest rate on a used car loan varies greatly from lender to lender, so you should check the applicable interest rate before choosing the lender. Consult the table below to find out the interest rate applicable to the used car loan. If the interest rate, fees, and LTV meet your needs, you can select the lender and proceed with a loan application.

Interest rate on used car loan

Bank name Interest rate
Bank of India 6.85%
UCO Bank 7.25%
Canara Bank 7.30%
National Bank of Punjab 7.75%
Overseas Indian Bank 8.55%
central bank 8.60%
National Bank of India 8.70%
Bank of Punjab and Sindh 9.85%
Bank of Maharashtra 9.95%
Bank of Karnataka 10.00%
**

Submit documents for the loan

Apart from the regular documents required to take out a loan, such as proof of identity, proof of address and proof of income, the lender will also request documents such as a proforma invoice, a copy of the RC book of the seller and a copy of the car insurance from the seller. The list of documents may vary from one lender to another. The lender often allows quick principle approval in most cases. Once the loan is approved, the lender requires more documents before processing the payment at the time of disbursement. The borrower must submit documents such as a contract of sale between buyer and seller showing the consideration for the sale, a mortgage authorization letter with Form 35 (if applicable) and a letter from the insurance company for the change of the insured name of the financier.

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After these documents are submitted, the bank processes the amount to the seller’s account, and the buyer can immediately take possession of the car.

** Interest rates on used car loans for all listed public and private banks (BSE) were taken into account for the compilation of data (excluding small financial banks). Banks whose data is not available on their website have not been taken into account. The data was collected from the respective bank’s website on April 4, 2022. The top 10 banks are listed in ascending order according to interest rates, i.e. the bank offering the interest rate the lowest (regardless of loan amount or term) on the used auto loan is placed at the top and the highest at the bottom. Chart for illustrative purposes only. The interest mentioned in the table is indicative and may vary according to the terms and conditions of the bank.

(Disclaimer: The opinions expressed in this column are those of the author. The facts and opinions expressed here do not reflect the views of www.timesnownews.com.)

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