There are several important things to consider when deciding to take a used car loan to purchase a used car in India. These are:
- Rate of Interest
The used car loan interest rate is obviously one of the most important things to consider when deciding to go in for used car finance. Used car loan interest rates differ from new car loan interest rates, and one should always opt to go in for used car finance with the lowest auto loan interest rates.
The used car loan interest rate varies from 13% to 20% per annum across various lenders in India. Alternately, one can also purchase a used car by taking a personal loan, however, interest rates range from 14% to 25% per annum. Thus, obviously, taking a used car loan is a cheaper way of buying a second-hand vehicle. However, in some cases, one might get a personal loan at a lower interest rate than a used car loan.
- Loan Amount
The loan amount is an important component to consider when deciding to go in for used car finance. Lenders usually provide loan amounts that are up to 70% – 80% of the valuation of the used car valuation amount. For instance, if the price of a used car is Rs 5 lakhs and the lender values the same vehicle at Rs 4 lakhs, the borrower will be eligible to obtain a loan amount of Rs 2.8 – 3.2 lakhs only. The remaining amount will have to be provided by the borrower, including money for the down payment of the vehicle. However, in some cases, a person could get a personal loan to cover the full cost of a used car, but he/she would need to ensure that they get a loan at competitive interest rates.
- Loan Tenure
The loan tenure is another important component to consider when deciding to go for used car finance. The tenure for a used car loan usually goes up to 5 years across most of the used car finance companies in India. Also influencing the lender’s decision with respect to the loan tenure are the age and condition of the used car that the buyer wants to purchase.
- Credit Score
People with low credit scores may be denied used car finance by lenders. This is especially so if the used car loan is an unsecured one. If one is looking at getting a used car loan to purchase a used car which is of an older make, the credit score becomes an even more important factor that lenders will take into consideration when deciding whether to provide the potential borrower with the loan.
Used cars are a great way to enjoy the convenience of a car at a lower cost than new cars. Used car finance is offered by banks and NBFCs across India both online and offline at competitive rates. However, borrowers must research the used car loan interest rates across lenders, review the loan offer, and read the terms and conditions before availing a used car loan in India, to avail the best deal.