In recent days there are a lot of people who are opting for pre-owned or second-hand cars that fit into their budget. The availability of used car loans to fund the purchase has become extremely helpful in this case. Checking a used car loan EMI calculator can give you an idea of your expected EMI amount. But apart from the EMI, there are a few other things to keep in your knowledge before you apply for the used car loan.
Here are some important facts you need to know;
- Type of car:
It is the initial step to know about the availability of the car type you want to buy. Then visit the seller and physically examine the condition of the car, both internally and externally. It is better to take a mechanic along while checking the car. Your car enthusiast friend can also be a great company in these car hunting expeditions.
- Availability of Finance:
Loans are offered by most banks and NBFCs to buy a used car. But the terms and conditions may vary from lender to lender. Secondly, it is necessary to know the car you are going to purchase has used car loan eligibility, as some lenders do not finance a used car older than a specified age limit.
- Valuation of Car:
The valuation of a car depends upon several factors taken into consideration, such as:
- User profile (personal and commercial use)
- Place of usage
- Number of kilometres driven
- A clear title of the car
- Any modifications are done or accidents of the car.
- Correct Loan Amount:
Generally, the finance companies will fund you 80-85% of the car value. You also need to pay a certain amount of the estimated value as the down payment to the lender. So, it is necessary to keep a check on your contribution and the financing option. How much of the car’s value can be financed should be known beforehand.
- Rate of Interest:
Used car loan interest ratess vary depending upon vehicle type, credit score, the profile of the customer, etc. The interest rate of a used car may be a little higher than new cars. A processing fee will also be charged, generally between 1% to 3%, on the value of the car.
- Tenure of Loan:
The tenure for the used car loan is lower than the tenure of the loan on new cars. It is a maximum of 3-4 years whereas, for a new car, it can go up to 5-7 years.
- Essential Documentation:
Whoever may be the seller of the pre-owned car, an individual, a dealer or a pre-owned company, it is very important to get through proper documentation to avoid any future issues. Check these documents thoroughly.
- Registration Certificate
- Car Insurance Papers
- Car’s Original Purchase invoice
- Road Tax Receipt
- Car Service Book
- Pollution Certificate
- If the ex-owner has taken a loan, ask for a copy of NOC from the finance company.
- Loan Repayment Structure:
It is important to find out about the prepayment fee if any in case you want to repay the amount earlier than the tenure. This may help you to let go of your burden as the interest rates are higher in a used car loan.
Thus, there are quite a few things you can check while buying a used car and arranging a used car loan. Adequate research of the loan terms helps you to land a favorable loan deal, and also make the repayment easier. By opting for a reputed lender you can ensure that your used car loan experience is one filled with a good customer experience and optimum cost-benefit.