Off late, the popularity of used car financing has gained much traction. One of the primary reasons behind such increase in demand for these advances is that they are easily available and attract lower rates than personal financing, making them more and more affordable for individuals across all economic strata. Also, you need to meet only a handful of eligibility requirements to qualify for a used cars loan financing that is provided by most reputed lending institutions today.
However, just like any other form of financing, a second hand car loan also comes with the responsibility of timely repayment in monthly EMIs. It is thus essential that you hold a suitable income capacity that allows you to repay the advance without straining your finances. Other aspects related to the loan require active awareness as well. We thus bring with us a detailed insight on these loans to help you better avail funding and manage it efficiently.
Second Hand Car Loan – Meaning
A used cars loan is a secured form of financing that utilises the car so purchased as collateral for funding the cost requirement. Herein, a borrower can raise a percentage of the car’s current market value as funds and meet the remaining cost on his/her own to complete such purchase. With reputed lenders, such financing percentage can be high, thus allowing you to raise maximum funds and leave little financial burden on you.
The car loan comes with a flexible tenure, allowing you to select your repayment plan based on your financial standing. As it is a secured advance and carries minimum risk to the lender, they also agree to levy affordable interest rates on the advance. With some of the best lenders in the market, you can also leverage your financial standing and other factors to secure the most competitive rate on a second hand car loan.
Top Features to Look for In a Used Cars Loan
You must check out the following features to find the best offer on your used car financing.
Rate of interest
Interest rate on second hand car loans varies from one lending institution to another. Also, other fees and charges on the advance can differ, thus affecting the total repayment liability. Make sure to go for a thorough marker research and compare financial institutions based on these factors. Doing so shall help you arrive at a suitable loan offer that remains affordable throughout the loan tenure. You can also leverage your income, credit score and such other factors to negotiate for better rates on your car loan for increased affordability.
You must also check the available tenure for suitable loan repayment in easy EMIs. An extended tenure allows you to choose instalments based on your repayment capacity, and thus helps manage your loan liability. Suitable tenure selection also allows you to check your total repayment liability through interest reduction. For instance, while a short tenure allows you to reduce your loan EMIs, it also results in an increase in interest levy. Contrarily, a shorter tenure, while increasing the EMIs payable, reduces the interest payable, thus limiting your financial liabilities.
It is essential to consider the maximum financing available as a used cars loan as it can help you better finance the car model you desire to purchase. With reputed lenders, financing of high value is easily available. You would only need to meet the minimum mentioned eligibility requirements laid down by the lender to avail suitable financing.
Loan to Value or LTV
When it comes to secured loans like second hand car financing, LTV or Loan to Value ratio caps the maximum financing available as a percentage of the asset’s current market value. In the case of used car financing, you can get a high LTV of up to 75 to 80% of the vehicle’s resale value as financing.
A high LTV ensures suitable financing for vehicle purchase, leaving minimum financial burden on you to meet the remaining vehicle cost.
Procedure of loan approval and disbursal
You must also check out the procedure of loan application processing for approval and disbursal. Usually, lenders offering used car financing online simplify loan processing, reducing the time taken to approve and disburse the loan amount. With such lenders, you may thus get funding with much ease and in minimum time possible, of say approval within a day of applying for the advance. Make sure to apply for the loan with all eligibility fulfilment and necessary documents to ensure hassle-free and streamlined loan processing.
Once you have considered all these factors, it gets easy to select the financial institutions from whom you would avail the advance. Remember, if your eligibility for the advance exceeds the minimum requirements, you stand a good chance of negotiation with your lender for securing the most favourable terms.
In case your eligibility is sub-minimum, you can still apply for the advance after having considered a few essential factors. For instance –
- You can apply for a used cars loan amount lesser than your maximum eligibility
- You can also choose a tenure longer than the ideal repayment period, which should help you bring down the EMIs payable, thus pushing up your loan eligibility
- In case you hold a low credit score, you can apply with a co-signor who has a high income as well as credit score; it should help raise the overall eligibility, thus allowing you to secure funding conveniently
- Individuals with limited earning can also arrange for documents related to all existing income and submit to the lender to improve their repayment capacity; additional incomes apart from salary include incomes like rent and investment profits
Application for Used Car Financing
Follow the simple steps given below to avail used car financing from your selected lender.
Step 1: Meet the minimum eligibility and document requirements.
Step 2: Visit the official website of your selected lender and navigate to the online portal for loan application.
Step 3: Next, open the application form and fill in the necessary details required. They can include personal, employment and financial details. Note that providing correct information is critical to hassle-free approval of your loan application.
Step 4: Once the details are provided, upload scanned copies of all the necessary documents.
Step 5: Proceed to submit your filled-up application form.
Once the application form is submitted, a lender representative will connect with you to verify the details provided. Following a successful verification, the lender assesses your loan application for eligibility. With everything in place, you can expect to receive approval for your loan within the next 24 hours in all likelihood.
Eligibility and Document Requirement for the Advance
Prepare to apply for your used cars loan with the selected lender through a simple eligibility and document check. The standard eligibility requirements you would need to meet include the following.
- Age above 18 years
- Stable source of income
- Applicant must be either salaried or self-employed with 6 months to 1 year of stability
- He/she must meet the minimum monthly income requirement
- Applicant must also be a residing Indian citizen with 1 year of stability
You need to submit the corresponding and other necessary documents to establish your eligibility for the advance.
- Identity proof that can include your PAN card, Aadhaar card, voter ID card, Passport, driving license and the likes.
- Address proof should include either or more of Aadhaar card, Passport, voter ID card, ration card, utility bills, etc.
- Proof of income like salary slips, income tax return for two previous years, bank account statements, financial statements, etc. depending on your mode of occupation.
Additionally, you would also need to provide your passport-size photograph/s along with these documents and a filled-up application form to proceed with loan procedure.
Benefits of Availing Used Car Financing
Some of the top benefits of purchasing a used car through loan financing include the following.
- These loans are pocket-friendly as the financing availed is always lower than that of the used car’s market price due to the LTV limitation. The EMIs payable are thus low too, making the loan more manageable than other finding options.
- Most lending institutions provide repayment tenure flexibility, thus allowing a borrower to choose a suitable term for liability repayment as per his/her financial standing.
- If exceeding the required eligibility fulfilment, you can almost always increase the LTV availability, thus extending the available financing value. Although, it would always be limited to the maximum loan amount availability laid down by your financial institution.
- You can experience uncomplicated loan application processing through the online mode, which, to a great extent, takes away the stress of securing necessary funds in time.
Further, used car purchase has its sets of benefits too. As in, a used car often comes much more affordable than a new car of the same make and model.
You must, however, consider a few essential aspects before sending your used cars loan application for maximised benefits. For instance, purchasing a used car that is not older than two years allows you to avail the most favourable features on the advance. Similarly, also make sure to check insurance coverage, pollution certificate and such other compliance aspects for your used car before applying.
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