How to Get a Used Car Loan?
5paisa Research Team
Last Updated: 09 Feb, 2024 11:47 AM IST
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Content
- What is a Used Car Loan?
- Benefits Of Second-Hand Car Loan
- Eligibility Criteria for Used Car Loan
- Documents Required for Applying for Second-Hand Car Loan
- Self-employed Individuals
- Rate Of Interest of Second-Hand Car Loans Offered by Top Banks
- Fees & Charges on Used Car Loan
- How To Apply for a Used Car Loan?
- Conclusion
The majority of lenders in India offer financing options for the purchase of pre-owned vehicles, particularly used cars. The selection of a second-hand car, including its age and model, significantly influences the approval process for obtaining auto financing.
Lenders assess factors such as the age of the car and whether its model has been discontinued before approving a used car loan. Typically, the combined age of the vehicle and the loan tenure should not exceed 8-10 years. Securing adequate funding becomes increasingly challenging for older cars. It is advisable to opt for newer car models, preferably not older than 2-3 years, to enhance the chances of loan approval.
Continue reading to learn how to get used car loan.
What is a Used Car Loan?
A Pre-owned Car Loan is a financing option designed to facilitate the purchase of a used vehicle, offering a streamlined application process through a bank. Enjoy advantages such as competitive interest rates and the flexibility of a repayment period extending up to 7 years. Here's how to get a car loan for a used car.
Benefits Of Second-Hand Car Loan
Below are the key advantages on how to get a loan for second-hand car:
• The borrowed amount is typically lower compared to a new car loan, resulting in lower monthly EMIs.
• Enjoy a lengthy repayment period.
• Some banks and NBFCs offer up to 100% financing.
• The application process is straightforward and can be conveniently completed online.
• Insurance expenses and depreciation rates tend to be lower than those for new cars.
• Minimal paperwork requirements.
• Certain banks and NBFCs provide flexible repayment options.
Eligibility Criteria for Used Car Loan
Now, let's explore how can I get a used car loan by looking at the eligibility criteria for Pre-owned Car Loans:
Particulars | Self-employed | Salaried Individuals |
Age | Between 23 and 60 years. | Between 21 and 54 years. |
Work Experience | Minimum 4 years of business continuity. | Minimum 2 years of experience. |
Income | Must earn a minimum of Rs 1.75 lakh per annum. | Must earn a minimum of Rs 2 lakh per annum. |
Tenure of Credit Facility | Up to 7 years. | Up to 7 years. |
Documents Required for Applying for Second-Hand Car Loan
The eligibility requirements differ for salaried employees and self-employed individuals, as outlined below:
Salaried Employees
• Age Limit: 21-65 years
• Income: At least Rs.15,000 per month
• Income Status: You must be working in the current organisation for at least a year
Self-employed Individuals
• Age Limit: 25-65 years
• Income: Must make a profit of at least Rs.1.5 lakh in a year
• Income Status: Must be in the same line of business for at least three years
Rate Of Interest of Second-Hand Car Loans Offered by Top Banks
Bank | Loan amount | Loan tenure | Rate of Interest |
State Bank of India | Up to 2.5 times your net annual income | 1 to 5 years, provided the age of the car is not more than 5 years | 12.60% p.a. |
HDFC Bank | Up to 100% value of the used car | 1 to 7 years, provided the total age of the car and the loan tenure doesn't exceed more than 8-10 years | 11.50-17.50% p.a. |
ICICI Bank | Up to 80% of the price of the car |
24 to 35 months | 10-17.65% p.a. |
TVS Credit Services | Up to 85% of the price of the car | 1 to 5 years | 13.1-15% p.a. |
Sundaram Finance | Up to 85% of the purchase price of the car | 1 to 3 years, provided the age of the car by loan maturity does not exceed more than 8-10 years | 12-14% p.a. |
Fees & Charges on Used Car Loan
Bank | Processing Fee | Prepayment Charges | Documentation Charges | Late Payment Charges |
HDFC Bank | Up to 1% of the loan amount or ₹5,000 (whichever is higher) | No prepayment charges for individual borrowers | ₹600 to ₹1,000 | 2% per month on the overdue amount |
State Bank of India | 0.50% of the loan amount, minimum ₹450 and maximum ₹10,000 |
No prepayment charges for individual borrowers |
₹1,000 to ₹2,000 |
2% per month on the overdue amount |
ICICI Bank | Up to 2% of the loan amount or ₹6,000 (whichever is higher) |
No prepayment charges for individual borrowers | ₹1,000 to ₹5,000 | 2% per month on the overdue amount |
Axis Bank | Up to 1% of the loan amount or ₹10,000 (whichever is higher) | No prepayment charges for individual borrowers |
₹500 to ₹5,000 | 2% per month on the overdue amount |
Kotak Mahindra Bank | Up to 2% of the loan amount or ₹10,000 (whichever is higher) | No prepayment charges for individual borrowers | ₹999 to ₹5,000 | 2% per month on the overdue amount |
How To Apply for a Used Car Loan?
Offline Method
Here are the steps to apply for a used Car Loan using the offline method:
• Visit the preferred bank branch or NBFC office.
• Complete the application form provided.
• Submit the required documents to assess your eligibility for the loan.
• Discuss with the lender regarding interest rates, processing fees, and other relevant details to proceed with the loan processing.
Online Method
Some lenders offer the convenience of applying for a used car loan online. You'll be required to visit the bank's official website and input basic information such as your name, mobile number, email ID, etc. After providing these details, a representative from the bank will get in touch with you to proceed with the request.
Conclusion
So, this was all about how to apply for a used car loan. Purchasing a used car through a loan is a practical choice for numerous individuals in India. By familiarising yourself with the eligibility criteria, necessary documentation, interest rates, and loan terms, you can confidently navigate through the loan application process.
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Frequently Asked Questions
Applicants must be at least 21 years old when applying for the loan and should not exceed 60 years of age by the end of the loan term. Additionally, applicants should have a minimum of two years of employment history, with at least one year spent with their current employer.
You have the option to obtain a loan for a pre-owned vehicle from banks, NBFCs, or fintech platforms. The primary consideration should be the interest rate of the loan. Typically, interest rates for used car loans tend to be higher compared to those for new car loans.
Banks provide loans amounting to 80-85% of the total value of the used car for a loan duration ranging from 1 to 5 years, ensuring that the combined age of the car and the loan tenure does not surpass 8-10 years.
Banks typically offer financing ranging from 40% to 90% of the car's value. Certain banks may extend loans of up to 48 times your monthly income.