Loan for Used Car: Eligibility, Documents, Benefits, Charges
Not everyone is financially strong enough to buy a new car which in India costs not less than Rs. 5 Lac but still everyone wants to own atleast one car. This is the reason why market for second hand car performs well in India as there are many buyers looking for it. And for low income earners buying a second hand car is always a good option considering the cost factor and also the fact that new models are being launched at a fast pace and people are ready to sell-off their car and buy a new one. So more options to choose from.
There are two options for poor income earning individuals for arranging money for buying the car – they have to either shell out money from their pocket or take a car loan. Here we’ll discuss about taking a car loan.
Benefits of second hand car:
Everything has its pros and cons and second hand car too has its own benefits as follows:
- Cost saving: Naturally a used car will cost less compared to a brand new car and so would be the monthly instalments. Moreover insurance premiums too are low in comparison to the new car.
- Depreciation value: As per Indian motor vehicle act the value of new car reduces by 15%.
Most important factor considered by the car finance companies is the annual income of the loan applicant. Depending on the income, the loan amount varies. However there are many banks which offer car loan to the low income earners. Check out this in detail.
The most important documents required when applying car loan for used car are as follows:
- Registration certificate: This book is must when applying for a loan.
- Insurance related documents of the used car.
- ID and address proof
- Income proof (salary slip), bank statement, IT return form-16.
- In addition to this, if car loan applicant is self employed then additional documents such as office ownership, business existence, income proof and other financial related documents such as P/L account, audited report by CA and others. Read about car loan for self employed.
What to look for in a loan?
You’ve finalized on which car to buy. Now it’s the time for getting a best loan. Here are the things you need to look for when choosing a loan:
- Interest rate and processing fee: Research with every bank and select the one which offers lowest interest rate and minimum processing fee. Even a small percentage increase in these two fees would increase your overall cost. Also while buying through dealers make sure you cross-check the rates with other banks because dealers have tie-up with banks offering loan. So always compare the rates quoted by the dealers with the non-partnering banks.
- Pre-payment penalty: Ideally every bank will charge a small fee if the applicant pays the loan before the actual tenure is over. So check with the bank on this.
Who offers car loan for second hand car in India:
Almost every bank in India offers loan for second hand car. Here are the few of the banks offering loans: Axis Bank, SBI, HDFC Bank, ICICI Bank, Canara, Andhra bank and others.
Why car loan for second hand car can get rejected:
- Car age is also taken into consideration by the banks and typically chances of application rejection increases if the car is too old.
- If the model of the car is no longer sold in the market then also your application can get rejected.