The market for used cars has seen a significant expansion in the past 10 years, with more and more second hand vehicles up for sale from dealers. The penetration of used car market has deepened significantly too with vehicle purchase possible in more and more towns and cities across India.
These purchases are further backed by necessary financing that enables people to defer the vehicle’s purchase price to am extended duration, thus enhancing the overall affordability.
These loans and advances come from several financial institutions in the market, allowing individuals to choose a suitable funding option based on their financing needs. Loans for used cars carry some of the best features of traditional car loans while being useful for second hand vehicle purchase, making them irresistible if one knows smart financing through loans and advances’ utilisations.
When availing financing for used car purchase, one must be well aware of a few aspects related to the advance. Let’s check out some of the most crucial ones to help you stay in light and well-informed regarding the loan offer you select.
Affordable Rates on Used Car Loans
Loans for used cars are available as secured financing options, which makes them worth less risk for lending institutions providing these advances. As a result, these loans attract low rates of interest in general than other unsecured loan options. One can make sure to avail a low-interest used car loan by working up on a few aspects related to his/her borrowing profile.
Along with the used car loan interest rate, it is also crucial to check out other fees and charges applicable on the advance. This shall help you assess the total cost of your used car loan for a better borrowing decision.
High LTV with High Overall Financing
As secured advances, used car loans follow the structure of LTV-based financing and are available only as a percentage of the car’s selling price, just like traditional car loans. Under this arrangement, one can avail as much as 95% of the used car’s market value as financing for the vehicle’s purchase. The borrower needs to finance the remaining 5% via a down payment made to the seller and/or the car dealer.
Along with this, the maximum financing limit of loans for used cars is pretty high too. These advances are thus suitable for financing vehicles costing up to Rs.10 Lakh with ease. Also, financing is available for vehicles of all makes and models, thus keeping the funding avenues widely accepting for many people aspiring to make used car purchase.
Simple Eligibility and Documentation
Used car loans also come with simple eligibility and document requirements. You only need to fulfil a handful of criteria to receive approval for the advance that is repayable in easy EMIs. For instance, you need to be within a specified age group to apply for the loan. Further, based on your city of residence, it is ideal to earn a monthly income over the minimum threshold set by the lender. Other aspects related to loan criteria include the applicant’s occupation and residential stability.
The document requirement for used car loans is simple too, and must be met to avail funding. Along with personal documents, the borrower must also present. The required vehicle documents sourced from the previous owner to establish and qualify lender assessment.
No Compulsion on Credit Score Maintenance
People often believe that credit score is a mandatory requirement for availing a loan. Not in the case of secured advances such as loans for used cars though as they are backed by asset collateral. You may thus avail this loan even with zero credit score in case you haven’t secured any financing yet. The only catch is that these loans will come with a tad higher interest rate.
However, in case you have availed any loan previously and hold a credit score under 700. It might be a red flag for the lender as such a score depicts low creditworthiness of the borrower. And is not appreciated among lenders.
When availing loans for used cars, borrowers must select the repayment tenure. After detailed assessment of their EMI affordability and make timely repayments of the advance. While servicing the loan, availing a balance transfer facility allows. The borrower to secure a lower used car loan interest rate from a new lender. Thus enhancing the overall loan affordability.