If you really think about it, it's easier getting a loan for a car than a loan for bus fare!
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    Mumbai Used Car Loan

    Mumbai is one of the busiest cities in India. Its allure has thousands of people flocking to it in the hope of fulfilling their dreams, which makes it even busier and busier as each day goes by. And when you are in Mumbai, you never get bored. You can enjoy its delicious street food, take long walks on the beach, shop from its endless cheap and super-luxurious store options, and go for long rides to enjoy its scenic beauty. From busy millionaires to hard-working labourers, from artists to analysts, and from dreamers to thinkers, Mumbai is a home for all.

    Owning a car in Mumbai

    Mumbai is one of the largest metropolitan cities in India with people always rushing to get where they need to be. Due to this, there are many modes of transport available within the city. Using its bus or metro services, you can always get connected to any part of the city. But being the proud owner of a car has a unique feeling to it. You can either use it to commute to work more easily instead of wasting too much time waiting for public transport that is usually packed with people or you can use it to get away from the hustle and bustle during the weekends.

    Why should you opt for a used car?

    Here are some of the reasons why used cars are a very good option:

    Lower cost: The cost of brand new cars is often high, which can make you hesitant on buying the car, or may cause you to give up on the thought of owning your dream car completely, but used cars are much more affordable. If you have set your sight on a certain type of car but do not have sufficient funds to purchase the car, you can always opt for an older model of the same car, which will be cheaper. You also have the option of purchasing a car model of a higher-end with the amount of funds you have at your disposal.

    Tension-free drive: Since you will be less concerned about getting the first scratch or dent on a used car than you would with a brand new one, you will be able to drive more freely. This is an important aspect to consider especially if you are not a skilled driver or are just learning to drive.

    Lower depreciation rate: The value of a new car depreciates rapidly, especially during the first 3 years of its purchase. If you plan to sell your car after a few years of its purchase, you will be losing quite a large sum of money. But the value of a used car is already depreciated, and after 3 years of its purchase, the depreciation rate slows down drastically. You will end up losing lesser money comparatively when you sell the car.

    Certified dealerships: These days, used cars are fully inspected by certified dealers before they are put up for sale. This ensures that you don’t get a bad deal when you spend your hard-earned money on a used car. However, it is up to you to do your research and purchase your car only from trusted and certified used car dealers.

    Fewer taxes: When you purchase a brand new car, you incur a lot of expenses on top of the cost of the car, such as handling charge, RTO charge, insurance charge, warranty, and a variety of other charges. On the other hand, used cars usually do not have extra expenses and you usually end up paying what is mentioned up front. Purchasing a used car can be even cheaper for you if you opt for one that is already insured or is under warranty.

    Auto finance for your dream car

    When you do not have sufficient funds to purchase a car, you can get financial help from banks and non-banking financial institutions (NBFCs). These lending institutions offer new and used car loans that finance up to 80% of the cost of the car at different interest rates. You can send in your applications to these institutions and if you meet their eligibility criteria, your loan will be approved. After the loan approval, the money is disbursed directly to your account. You can then repay the loan by paying equated monthly instalments (EMIs) over a specified tenure, which you can choose according to your convenience.

    How can you apply for a used car loan in Mumbai?

    There are 2 ways of applying for a used car loan in Mumbai: online or offline. In order to apply for a used car loan offline, visit the nearest branch of your bank, fill in a used car loan application form, and submit it along with the documents mentioned in the form. Once you submit your application, a representative of the bank will get in touch with you to take the application forward.

    While applying for a used car loan online, you can visit the website of your banking partner or any other financial lending institution and fill a used car loan application form. You may be required to upload the necessary documents on to their website or a representative of the institution may get in touch with you in order to collect a copy of your documents.

    When applying for a loan, make sure to visit the websites of different banks and NBFCs or visit them in person, see what they have to offer, compare the offers, choose the best one that suits your needs, and submit your application. Your used car loan application has lower chances of being approved if you submit multiple applications to multiple banks and NBFCs.

    What is the eligibility for a used car loan?

    When you apply for a loan, the most important factor considered by lending institutions is your loan eligibility. Different banks and NBFCs have different eligibility criteria for used car loans and here are some of the basic ones:

    • The applicant should be between the ages of 21 and 65.
    • He or she should have a credit score of 750 and above.
    • He or she should be self-employed or a salaried individual.
    • He or she should have a minimum work experience of 2 years in the same field.
    • He or she should have an annual income of Rs.2-4 lakh.

    If your credit score is below 750, work on improving your score before you apply for a used car loan as a loan rejection will further impact your credit score negatively.

    What are the documents required for a used car loan?

    To apply for a used car loan, you need to submit the following documents:

    • Proof of identity such as Aadhar card, PAN, voter ID, or passport.
    • Proof of age such as birth certificate, 10th and 12th school certificates, or driver’s license.
    • Proof of address such as telephone or electricity bills.
    • Proof of income such as the last 3-6 months’ payslips or bank statements along with the IT returns.

    What are the features of a used car loan?

    Interest rate: The rate of interest charged for used car loans varies from one lender to the other. The interest rate for used car loans is usually higher than the rate of interest for a new car loan because used cars have higher insurance and maintenance cost.

    Processing fee: In order to process your used car loan, financial institutions usually charge a small fee, which is known as a processing fee. This fee is usually about 2% of the entire loan amount. Once your loan is approved, the processing fee will be deducted from the principal amount that is disbursed to your account. If you are a valued customer, you can talk to your bank to get the processing fee waived off, but the decision depends entirely on the bank.

    EMI: You have to repay your used car loan in EMIs over a specified period of time. Your bank will calculate the EMI and will inform you of the same before disbursing the principal loan amount into your account. You can ask the bank for a loan repayment schedule in order to know how much you have paid and how much you still owe the bank after paying each EMI.

    Prepayment and preclosure fee: After you have paid 6-12 EMIs, you have the option of prepaying the remainder of your loan amount or making part payments to pay off the loan amount quicker. However, you may be charged a prepayment or a preclosure fee. This fee varies from lender to lender and depends on the remaining tenure of your loan.

    Foreclosure: In case of a used car loan, your car acts as a collateral. If you fail to pay your EMIs, the bank will repossess the car and will sell it off in an auction to retrieve the remaining dues. If the bank fails to retrieve the entire remaining amount due at the auction, you may be required to pay the rest. This process of repossession is known as foreclosure, which negatively impacts your credit score and makes it difficult for you to get loans approved in future.

    How to calculate your used car loan EMI

    Your used car loan EMI depends on the principal loan amount disbursed to your account, the interest rate, and the loan tenure. It is often difficult to calculate the EMI manually as it is prone to errors. For quick and accurate calculation of your loan EMI, you can use an online EMI calculator.

    Such tools are easily available on the internet and all you have to do is input the used car loan amount, the interest rate, the loan tenure, and the processing fee into the tool. The tool will take all the information you have put in into account and will give you the exact amount you need to pay each month instantly.

    The car loan EMI calculator will also give you a detailed breakdown of your entire repayment schedule in the form of a table, which is known as an amortisation table. In this table, you can also see the outstanding loan amount due after you pay each EMI and the amount you pay as interest each month.

    Compare used car loans

    Lender Loan Amount Interest Rate Tenure
    Magma Fincorp Up to 90% of the total value of the vehicle 16% - 20% p.a. Up to 15 years
    Axis Bank Minimum - Rs.1 lakh Maximum- Up to 90% of the total value of the car Minimum 15% p.a. Up to 5 years
    Kotak Mahindra Prime Minimum - Rs.1.5 lakh Up to 90% of the total value of the vehicle 15% - 20% p.a. Up to 5 years
    HDFC Bank Minimum - Rs.75,000 Maximum - Up to 85% of the total value of the car 12% - 15.5% p.a. Up to 7 years (The age of the car should not be more than 10 years at the time of car maturity)
    TVS Credit Services Minimum - Rs.20,000 Maximum - Up to 85% of the total value of the car 13.1% - 15% p.a. floating Up to 5 years
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