Home programming jobs What is a used car loan and how to apply for it – Forbes Advisor INDIA

What is a used car loan and how to apply for it – Forbes Advisor INDIA

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Cars are certainly among the things that can be categorized as both a necessity and a luxury. Buying a new car or even a used model can take up a lot of your budget and can take years to save. This is where loans come in.

You have two main choices when it comes to getting a car loan in India. The first is the regular car loan and the second is a used car loan. If you’re looking for the latter, here are the basics of used car loans and how you can apply for one.

Basics of a used car loan

A used car loan, also called used car loan, is a type of loan that aims to help a person obtain a good used car. This involves making monthly payments rather than paying cash, which is a slightly cheaper way to pay for a vehicle.

That said, a loan for used cars in India is subject to lower loan amounts. Keep in mind, however, that’s not a bad thing. Unlike other loans with high value assets, used car models are cheaper than new ones. This means you can expect lower monthly payments over the long term.

Used car loan vs new car loan

If you are new to loans, different types of loans may confuse you at first. For example, let’s talk about a used car loan and a new car loan.

Now, the main difference between the two is the type of car or vehicle you will be able to get. A used car loan comes with a used car while a new car loan comes with a brand new model. The former also has less money at stake. This makes it a good choice for those who want a car, but still don’t want to splurge monthly. The latter, on the other hand, will suit those with a higher financial capacity.

Used car loan vs personal loan

Both the used car loan and the personal loan can be used to finance a car. However, a personal loan has a more holistic approach for borrowers. While the first is strictly limited to the purchase of a used car, the second can be used for any type of personal need, hence its name. You can apply for it if you need money to invest, your personal expenses and your tastes.

The main point is that it can be difficult to apply for a personal loan if your main goal is to have a car. If so, it will definitely be more practical to stick with a used car loan.

How a used car loan works

The process for a used car loan begins with a financial institution. It can be either an informal lender or a corporate bank.

The institution will then evaluate your application by evaluating the specific opportunity model you wish to have, your budget, current source of income, and other financial information. After that, expect them to come up with a financial plan consisting of interest rates and required monthly payments, to name a few.

If you agree to the terms, you will get the loan money to buy your car. Your only responsibility after that is to keep track of monthly payments.

A used car loan is not too different from other types of loans. It works all the same since there are elements like the amount of the loan, the monthly payments, the interest rates, among others.

Specifications of a Used Car Loan in India

First of all, keep in mind that the specifications of a used car loan in India vary from bank to bank.

For reference, however, you should expect interest rates to vary between 7.50% and 15.50%. It’s unusual for rates to be higher than this, but it’s not entirely impossible, especially if you’re looking for a high-end financial institution.

As for the term of the loan, the maximum term can be up to seven years or 84 months. This is a relatively new rule in lending, so you should limit your expectations to just 72 months. Similarly, there are also banks that allow repayments of more than seven years. It will all boil down to the conditions of a financial institution regarding used car loans in India.

Advantages and disadvantages of a used car loan

A used car loan may seem like the perfect choice, but don’t forget that it also has its fair share of pros and cons.

Here is a list of some of the benefits you can get by taking out a used car loan:

  • Longer repayment period
  • Lower monthly payments
  • Reduced insurance costs (due to the used condition of the car)

The disadvantages, on the other hand, are:

  • Relatively higher interest rates
  • High deposit required
  • Faulty Used Cars Can Do Your Pocket More Harm Than Good

To ensure that you only get the professional side of the loan, be sure to invest time in choosing the right vehicle, the right financial institution and the terms and conditions that you will be working with. You may also need to consider working with financial consultants if you have the budget to spare.

How to Apply for a Used Car Loan in India

Applying for a used car loan in India is actually easy. Here are the steps you need to follow:

  1. Visit the bank you plan to work with. Make sure you have researched the best possible financial institution for your needs before visiting a branch.
  2. Provide the necessary documents, including the completed application form. The application form will be delivered by the bank itself once you have visited them. Some also offer a downloadable version on their website for convenience.
  3. Wait for the bank clerk to assess your eligibility and needs. It usually won’t take long as long as you’re sure you’ve submitted the loan requirements.
  4. Meet with the accountant to discuss the terms involved in your used car loan. This is the last step where the accountant(s) will tell you about the monthly repayments needed, interest rates, terms and conditions and likes.

Be sure to listen to every term given in the last step to avoid agreeing to unreasonable loan terms.

Things that impact a used car loan

Getting a used car loan will only be easy if you are qualified. That said, here are some things you should pay attention to before applying for the said loan:

  • Credit score
  • History as a borrower (if not your first time)
  • Source of income
  • Guarantors
  • Employment history

Expect it to be tough if you have an undesirable history as a borrower, employee, and likes. The credit score will especially play a big role.

Qualifications of a Used Car Loan in India

Since the required documents vary depending on the financial institution you are working with, we will focus on qualifying for a used car loan in India. See the following list:

  • Must be between 21 and 65 years old; Minimum of 25 if self-employed)
  • Monthly income must be INR 15,000 or more; INR 1.5 lakh per year if self employed
  • The candidate must have been in their current job for at least one year; The company must exist for 3 years and more if it is independent

These are the general qualifications set for Indian used car loan applicants. Others may be added depending on the bank.

Conclusion

A used car loan refers to a method of financing reserved for used cars. Applying for it will allow you to have a used but still functional vehicle for a much lower price. This is especially in relation to the new models.

However, note that like most loans, a used car loan works through monthly payments and interest. This means that it does not come with a specific price and will always vary depending on the financial institution you are working with.

Getting a used car loan in India does not come with heavy requirements. As long as you’re 21+ and can exceed the income requirement for the model you’re looking for, you’re good to go. You can also prepare a checklist to ensure that you are able to get a used car loan smoothly.

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