India’s second-hand car market is anticipated to scale by 22.79% from 2022 to 2026. The pre-owned car segment, which was scaled at 27 billion in 2020, will witness a surge of 50 billion USD by FY2026. Being reasonably priced, a pre-owned car is considered a better alternative to new cars. Moreover, the slow depreciation rate and lower insurance and registration costs drive the second-hand car market.
The robust demand for second-hand cars has resultantly stirred the demand for second-hand car loans among buyers. However, individuals looking for second hand car finance options must factor in specific parameters to make the borrowing worthwhile.
5 Key things you should know before avail second-hand car finance
Individuals planning to avail second-hand car finance must consider the following points to make an informed decision-
- Interest rate: The first and foremost thing that borrowers should consider is the interest rate which varies from lender to lender and is determined based on the vehicle type, age, borrower’s profile, credit score, and more. The interest rate for a second-hand car loan is slightly higher than that of a new car loan interest rate.
- Loan tenor: Most lending institutions extend a loan tenor of 5 years. Borrowers should opt for a loan tenor that best suits their repayment capabilities. For credit options like a used car loan, lenders generally do not extend a flexible repayment tenor due to the risk factor. The loan tenor of a used car is also influenced by the age and condition of the vehicle.
- Time needed for loan approval: Another vital factor that borrowers should consider is the amount of time taken to disburse the loan amount. Availing of a used car loan is quite a lengthy process. Transferring the car papers, hypothecation status of the vehicle, and checking any previous debt or legal turmoil could be time-consuming.
- Sanctioned loan amount: Borrowers should settle for a lender offering a high-value loan amount.Lenders will offer 70% to 80% of the car’s market value as loan principal, and the rest of the amount has to be paid as a down payment. Once the loan amount is sanctioned, borrowers must use the EMI calculator to compute the monthly instalments and plan the repayment schedule accordingly.
- Eligibility and proper documentation: Borrowers will have to meet the eligibility criteria set by the lender and have to adhere to the basic parameters like CIBIL score, repayment capability, income status, etc.
Buyers should also be watchful regarding the documentation required to avail of second-hand car loans, as lenders will scrutinise before deciding on a loan amount. Here are the documents that borrowers need to keep in order:
- KYC papers
- Salary slips and bank statements
- No Objection Certificate (NOC)
- Pollution under control certificate (PUC)
- Car registration certificate
- Insurance papers
While purchasing a pre-owned car, buyers must make sure to transfer the car insurance from the previous owner to their name. Moreover, if one wants to move the car to another state, the car will have to get registered under that state’s Regional Transport Office. However, if all these processes turn out to be a little tedious, individuals can conveniently opt for a personal loan and dodge the hassles.
A personal loan is an unsecured credit option helping borrowers fetch a substantial loan amount without pledging any asset as collateral. Also, it has no-end use restrictions. Hence borrowers can easily apply for a personal loan for used cars online.
Moreover, the eligibility criteria for a personal loan are easy to meet, and documentation procedure is simple. Albeit, a personal loan is a preferred loan option, borrowers should also be aware of the reasons for personal loan rejection and how to avoid them.
Besides knowing what is unsecured loans, borrowers should also know the other advantages of opting for an unsecured credit option like a personal loan. For instance, unlike a used car loan, borrowers will get instant disbursal of loan amounts and can use the amount for any personal and professional purposes.
A personal loan is the most sought-after credit option owing to the quick loan disbursal process. Knowing how the disbursal process for a personal loan works will give borrowers clarity regarding the same.
While servicing a personal loan, borrowers can opt for specially-tailored pre-approved offers extended by several financial institutions like Bajaj Finserv. These offers are available on a wide range of financial products like personal loans, business loans, credit cards, etc., which helps streamline the lending process. Willing individuals can check the pre-approved offers by entering their names and contact details.
To sum up, the easy availability of second-hand car finance options has made it suitable for individuals to materialize their dreams of owning a car. However, applicants can also opt for a personal loan depending on the stringency of loan terms, loan processing time, and urgency of funds.