Cars are definitely among the things that can be classified as both necessity and luxury. Purchasing a brand new car or even a second hand model can take up a lot of your budget and may take years for you to save up for it. This is where loans come in.
You have two main choices when it comes to getting a car loan in India. The first one is the regular auto loan and the second one is a pre owned car loan. If you are looking for the latter, here are basics about pre owned car loans and how you can apply for one.
Related: Car Loan Interest Rates
What is a Pre Owned Car Loan
A pre owned car loan, also known as a used car loan, is a type of loan that aims to help a person get a good secondhand car. This involves making monthly payments rather than paying in full cash, which is a somewhat more budget-friendly way to cop a vehicle.
That said, a loan for used cars in India is subject to lower loan amounts. Keep in mind, however, that this is not a bad thing. Unlike other loans that come with high-value assets, second hand car models are priced lower than new ones. This means that you can expect lower monthly payments in the long run.
Pre Owned Car Loan Vs New Auto Loan
If you’re new to loans, then different loan types may confuse you at first. For instance, let’s talk about a pre owned car loan and a new auto loan.
Now, the main difference between the two is the kind of car or vehicle that you will be able to get. A pre owned car loan comes with a used car while a new auto loan comes with a brand new model. The former also has a lower amount of money involved. This makes it a good choice for those that want a car, but still don’t want to splurge monthly. The latter, on the other hand, will fit those with a higher financial capacity.
Pre Owned Car Loan Vs Personal Loan
Both pre owned car loan and a personal loan can be used to finance a car. However, a personal loan has a more comprehensive approach for borrowers. While the former is strictly limited to getting a secondhand car, the latter can be used for any kind of personal need, thus the name. You can apply for it if you need money for investing, personal expenses, and likes.
The central point is it can be hard to apply for a personal loan if your main goal is to have a car. If this is the case, then it will definitely be more convenient to stick to a used car loan.
How A Pre Owned Car Loan Works
The process of a pre owned car loan starts with a financial institution. It can either be an informal lender or a corporate bank.
The institution will then evaluate your application by assessing the specific secondhand model that you want to have, your budget, current income source, and other financial-related information. After this, expect that they will come up with a financial plan consisting of interest rates and required monthly payments, to state some.
If you agree to the terms, then you will get the loan money to buy your car. Your only responsibility after that is to keep up with the monthly payments.
A pre owned car loan doesn’t really stray too far from other loan types. It works just the same since there are elements like the loan amount, monthly payments, interest rates, among others.
Specifications Of A Pre Owned Car Loan In India
First, keep in mind that the specifications of a pre owned car loan in India will vary from bank to bank.
For reference, however, you should expect interest rates to range from 7.50% to 15.50%. It’s unusual for rates to go higher than this, but it’s not totally impossible, especially if you’re looking into a high-end financial institution.
As for the loan period, the maximum length can go up to seven years or 84 months. This is a relatively new rule in the loan field, so you should limit your expectations to only 72 months. Similarly, there are also banks that allow repayments of more than seven years. It will all boil down to a financial institution’s terms regarding used car loans in India.
Pros And Cons Of A Pre Owned Car Loan
A pre owned car loan may seem like the perfect choice, but remember that it also has its fair share of pros and cons.
Here is a list of some of the pros that you may get by opting for a pre owned car loan:
- Longer repayment period
- Lower monthly payments
- Lower insurance costs (due to the secondhand condition of the car)
The disadvantages, on the other hand, include the following:
- Relatively higher interest rates
- High down payment required
- Faulty second hand cars may do your pocket more harm than good
To ensure that you will only get the pro side of the loan, make sure to invest time in choosing the right vehicle, financial institution, and overall terms that you will work with. You may also need to consider working with financial consultants if you have the budget to spare.
How To Apply For A Pre Owned Car Loan In India In 2023
Applying for a pre owned car loan in India is actually easy. Here are the steps that you need to follow:
- Visit the bank that you plan on working with. Make sure that you have done prior research about the best financial institution possible for your needs before visiting a branch.
- Provide the necessary documents, including the duly-filled application form. The application form will be given by the bank itself once you visit them. Some also provide a downloadable version on their website for convenience.
- Wait for the bank attendant to evaluate your eligibility and needs. This usually won’t take long as long as you’re sure that you submitted the requirements for the loan.
- Meet with the accountant to discuss the terms involved in your pre owned car loan. This is the last step wherein the accountant/s will talk to you about the necessary monthly repayments, interest rates, terms and conditions, and likes.
Make sure that you listen to each term given during the last step to avoid agreeing to unreasonable loan conditions.
Factors That Affect A Pre Owned Car Loan
Getting a pre owned car loan will be easy only if you are qualified. That said, below are some things that you should pay attention to before applying for the said loan:
- Credit Score
- Background as a borrower (if it isn’t your first time)
- Income Source
- Employment History
Expect that it will be hard if you have an undesirable background as a borrower, employee, and likes. The credit score will most especially play a big part.
Eligibility Criteria For A Pre Owned Car Loan In India
Since the required documents will vary depending on the financial institution that you’re working with, we’ll focus on walking you through the qualifications for a pre owned car loan in India. See the following list:
- Must be between 21 and 65 years old; Minimum of 25 if self-employed)
- Monthly income should be INR 15,000 or more; INR 1.5 lakh yearly if self-employed
- Applicant must be in their current job for at least a year; Business must be standing for 3 years and more if self-employed
These are the general qualifications set for Indian used car loan applicants. Additional ones may be added depending on the bank.
A pre owned car loan refers to a financing method that is reserved for second hand cars. Applying for this will allow you to have a used yet still functional vehicle for a significantly lower price. This is most especially when compared to brand new models.
However, note that just like most loans, a pre owned car loan works through monthly payments and interests. It means that this doesn’t come with a specific price, and will still vary depending on the financial institution that you’re working with.
Getting a loan for used cars in India doesn’t come with heavy requirements. As long as you’re 21 years of age and above that can pass the required income for the model you’re looking into, then you’re good to go. You may also want to prepare a checklist to ensure that you are able to get a pre owned car loan smoothly.