Most lenders in India - banks and Non-Banking Financial Companies (NBFCs) provide used car loans for the purchase of used/second-hand/pre-owned cars. The age and model of the second-hand car that you choose plays a major role in obtaining auto financing for the purchase of the said car. Before approving a used car loan application, lenders consider the age of the car and whether the model has been discontinued. The sum of the age of the car and the loan tenure of a used car loan must not exceed more than 8-10 years. The older the car, the harder it is to obtain sufficient funding to purchase the car. Opt for a newer car model and one that is not more than 2-3 years old.
Most consumers hesitate to opt for a second-hand car when they dream of owning a brand new car. However, there are various benefits to purchasing a used car such as:
If the second-hand car is to be bought from a private seller, it is advisable to do some research such as whether the car is stolen or is there an unpaid debt on the car, and the lack of proper maintenance of the car.
Once you have narrowed down the make and model of car you wish to purchase, look for used car loan offers across the top lenders in the country. Visit a reliable third-party website to compare various used car loan offers and choose one with the lowest interest rate, zero processing fee, a suitable loan tenure, and flexible repayment options. After choosing a reputable lender who promises minimal paperwork and instant loan disbursal, check the car loan eligibility criteria set by the bank or NBFC.
Any salaried or self-employed individual aged between 21 to 65 years with a steady income, a good credit score, and a stable occupation can apply for a used car loan. The loan amount, interest rate and loan tenure of a used car loan differ from lender to lender. As the resale value of a second-hand car is low, lenders offer used car loans at a higher interest rate compared to new car loans. You can always negotiate with the lender for a better interest rate. Furthermore, the insurance cost of a used car is higher than a new car as a result of a high maintenance cost and the scarcity of car spare parts.
Banks offer up to 80-85% of the total value of the used car for a loan tenure of 1 to 5 years provided the total age of the car and the loan tenure doesn't exceed more than 8-10 years. When you approach a bank for a used car loan, the bank will appoint an expert for the valuation of your car. The bank will offer you 80-85% of the total value of the car as assessed by the valuation expert. You will have to make the down payment and pay the differentiation amount out of your own pocket.
Visit the bank website, download the car loan application form, fill it up and submit it along with the necessary documents like identity proof (Aadhaar Card and Passport), age proof (PAN Card and Driving License), income proof (Form 16, last 6 months’ bank statement and payslips), and address proof (utility bills and ration card). The bank will verify the details furnished by you and process the car loan application. Upon car loan approval, the loan amount will be disbursed to your bank account in a short period of time. You can also visit the nearest bank branch to apply for a used car loan.
Like a new car loan, a second-hand car loan is also repaid through Equated Monthly Installments over a specified loan tenure. To find out how much your used car loan will cost you monthly, you can use the free online car loan EMI calculator, available on the bank website or a third-party comparison portal. The tool is easy and simple to use.
All you have to do is enter the car loan amount, loan tenure, interest rate, and processing fee into the tool. Click on ‘calculate’ and get instant and accurate results in the form of an amortisation table, a bar graph, and a pie chart. The amortisation table represents the periodic loan repayment schedule of your car loan. It consists of interest payments, EMIs and the outstanding due after each EMI payment.
Here is a list of the top banks and NBFCs providing second-hand car loans in India:
|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.|
Before applying for a second-hand car loan, check your car loan eligibility so as to avoid a loan rejection that can have a negative effect on your credit score.