In India, the pre-owned car market is consistently experiencing growth. Even in the current pandemic situation, the dealers across different states have witnessed a healthy trend as people are gradually acknowledging the various benefits associated with purchasing used cars. As it goes without saying, a used car allows you to enjoy a smooth riding experience, without burning a hole in your pocket. In addition, since the used car markets are thriving in India, it has also become quite convenient to avail the second hand car finance facility.
With this incredible lending solution, the consumers can bring home any basic to high-end model of a pre-owned car, even while dealing with a budget constraint. As they can repay the entire loan amount to the lender in the form of well-calculated EMIs with a low interest rate and within a flexible tenure period. So, if you are planning to get a secondhand car financed, you must consider the eligibility factors listed below as they can impact your application and approval for the loan.
- Applicant’s credit score –With a high credit score, not only your chances of getting an approval are high but you also become eligible to negotiate the interest rate and other terms and conditions. On the other hand, any default in the payment cycle can either result in application rejection or you will be asked to pay a high interest rate.
- Condition of the car you intend to buy – During the loan disbursal process, the model, age and the overall condition of the car are certain points that are strictly taken into consideration by the lender. The car remains as a collateral which can be seized by the lender in case the borrower fails to make the payments. So, from the lender’s point of view, if the car’s condition is good then definitely your eligibility for the loan improves.
- Debt-to-income ratio–A borrower with a high and stable source of income is expected to timely make all the repayments. At the same time, the debt-to-income ratio gives a clear reflection of how much of your income is going towards debts and hence, it is advisable to maintain a low ratio in order to increase your eligibility for the loan.
- Car’s documentation history – Verifying all the documents and on-road history of the car is not only important for the buyer but for the lender as well. Purchasing a car with registration documents, road tax receipts, original invoice and other necessary papers increases the resale value as well as your chances of getting the loan quickly approved.
Things to do before applying for secondhand car loans
- In order to avail a secondhand car finance facility, the first step is to do financial planning as this will give you a clear idea of how much money you have and how much you wish to take in the form of a loan.
- The markets are flooded with several financial institutions that provide used car loans, so you must compare top four or five lenders, their intertest rates, processing fee, prepayment charges and other factors, before settling down for any one of them.
- Once you are done selecting the car, it is extremely necessary to take a test drive and check all its parts in order to avoid any regrets in the future. Also, you must verify that it is not associated with any conflicting matter or a legal battle.
What are the benefits of taking secondhand car loans?
- Affordable interest rate – The used cars always carry several risks associated with them and hence, the interest rates offered on them are usually higher in comparison to new cars. However, due to a consistent increase in the demand for used cars, the lenders have started offering low interest rates to those who have a high credit score.
- Minimal and hassle-free documentation process – In case of used car loans, the documentation process is simple, minimal and quick. In addition, many of the lenders have moved the whole process online to make it easier for everyone to perform the entire process from application to approval, without leaving the comfort of their home.
- Availability of high loan amount – Even for used cars, the borrowers can find a bunch of lenders that provide a loan amount of up to 60-70 lakhs. This way, you get to purchase any Indian or imported second hand car of your preference, without experiencing any financial restriction.
Clearly, opting for secondhand car finance is the most reliable option when it comes to purchasing a secondhand car. All you have to do is maintain a good credit score, reflect a low debt-to-income ratio, check the condition of the car and possess all its documents in order to increase your eligibility and to seek approval for the loan. Most importantly, compare multiple lenders and their services to lock in the best possible deal for yourself.