With a massive vaccination drive underway, the Indian auto industry is cautiously optimistic about an increase in sales. More than new cars, the used-car industry is expected to see traction due to a variety of factors. Even for those who are still employed, the future of our economy looks uncertain. Hence, buying a used car is a better alternative to purchasing a more expensive new car.
If you are planning to apply for a used car loan, make sure you do your due diligence first before taking the plunge.
Pick the Right Lender
Most borrowers choose a lender they already have a financial relationship with. While this is not a bad idea, it is worthwhile to note that lenders compete with one another to attract customers.
This means competitive interest rates, lesser down-payment, flexible repayment terms, etc. As such, it is always prudent to look around before finalising your lender.
Furthermore, if you have a good credit history, financial institutions will pursue you for your business as opposed to the other way around.
Negotiate for A Low-Interest Rate
One of the main reasons behind choosing the right lender would be a low-interest rate. Again, in a competitive marketplace, you stand to get a good deal if you play your cards right.
Armed with a good credit score and history, you can aggressively bargain for a low interest rate on a used car loan. Alternatively, you can reduce the interest rate with a large down-payment or by extending the repayment tenure.
Favourable Terms and Conditions
Getting a good deal on a used car loan is not just about procuring a low-interest rate. Financial institutions can incorporate hidden costs and fees in addition to the processing charges within the loan agreement.
Go through your loan document meticulously to ensure that there are no adverse clauses that can hurt you later during your repayment tenure.
The following documents are required to avail a used car loan –
- Application form
- Passport size photographs
- Car valuation report
- Identity proof: PAN Card, Voter’s ID, Driving License, Passport or Aadhaar Card
- Address proof: Passport, Ration Card, Driving License, Aadhaar Card, Electricity bill, LIC Policy or Voter’s ID
- Income Proof: Bank statements, salary slips, Form 16, Audit sheet, Balance sheet and Profit and Loss account
Do Your Homework
Before applying for a used car loan, be sure in your mind what you want. The first place where you start is your budget.
As a general rule of thumb, your expenses towards your car which include EMI, maintenance, insurance premiums, fuel, etc. should not be more than 25 percent of your monthly income. This will ensure that you do not have to compromise on your regular expenses, savings and bill payments.
Go for Certified Used Cars
When preparing to apply for a used car loan, choose certified pre-owned cars or CPOs for peace of mind. Purchasing a CPO helps eliminate pitfalls such as false seller claims, fake dealers or faulty vehicles. This will make your loan application and approval easy too.
In preparation for future consumers who may wish to avail a used car loan, second or third-hand cars are inspected thoroughly before certification. Additionally, many car manufacturers provide factory assurance along with their certification program. Private organisations or dealers do not offer any such services.
Get a good deal on the used car itself
The lower the price of your used car, the lesser will be the loan amount you need. This means, your loan burden will be manageable. For that, here are a few things to do:
- No matter how many hours you have spent researching the car you intend to purchase on the web and read its online reviews, nothing beats a good old-fashioned test drive.How quick is the pick-up, the false in the clutch or the brake and the smoothness with which you can transition from one gear to another will help you to make an informed decision.
- When thinking of applying for a used car loan, you are always going to get a more competitive price from a private seller than a dealer. This is because car-owners do not have to account for business expenses like commercial property costs, employees, etc.
Choose a slow-selling model rather than a popular one. Dealers often shower a host of benefits, lower the price and offer other attractive schemes to sell off the slow-selling models faster.If you approach a private owner for a slow-selling model, you could land an even lower price.
All in all, if you fulfil the eligibility criteria and have all your paperwork in order, applying for and procuring a used-car loan should be hassle-free. Research about different lenders and their offers as well. Most financial institutions market the speed with which they process their used-car loans to attract customers.
So, you should be the proud owner of a four-wheeler of your choice in no time!