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    Used Car Loans in Kerala

    From being a status symbol to a convenient mode of transportation, cars have become an essential part of our daily lives. Understandably, with a hike in car prices across the top makes and models of cars in the country, it has become harder to purchase a car of your choice. Fortunately, banks and non-banking financial companies offer easy access to auto finance in the form of low-interest rate car loans for the purchase of new and used cars.

    Owning a Car in Kerala

    Known as 'God's Own Country', Kerala has a lot to offer in terms of spices, coffee, tea, a delicious cuisine, backwaters, and palm-lined beaches. It is considered to be a tropical paradise in Southern India. Whether you are a resident of the state or a tourist, it would be convenient to own a car of your own in order to explore this beautifully-scenic place in comfort.

    The price of a new car is higher than that of a used car. Therefore, purchasing a used car is a better alternative when you are low on funds. Banks offer 3 types of loans - new car loans, used car loans, and loan against cars. The interest rates on car loans vary depending not only on the types of car loans but also the lenders. To purchase a used car of your choice, you can opt for a used car loan with a low interest rate and flexible repayment options.

    Why is a Used Car a better choice?

    Here are some circumstances under which a used car can be a better choice than a brand new car:

    • When you start to learn driving for the first time, it is better to practise freely in a used car rather than worry about damaging a brand new car.
    • When you don’t have sufficient funds to purchase a brand new car, you can choose a well-maintained used car of the same make and model without breaking your long-term savings scheme to realise your dream.
    • Certified dealerships inspect the used cars thoroughly before putting them up for sale. Therefore, you don’t have to worry about getting the short end of the deal.
    • The cars that are launched nowadays come with a longer warranty period. Therefore, you can pick a used car that is less than 5 years old (and within the warranty period) and claim warranty for damages.
    • A high down payment on a car of your choice can lower your EMI payments and hence, reduce the overall cost of your car loan. So, if you have don’t have enough funds to make a significant down payment, then opt for a used car. As you know, the price of a used car is lower than the price of a new car.
    • Did you know that depreciation value of a car is the highest in the first 2 years of its age? So, by opting for a used car that is more than 2 years old, you don’t have the same stress over the depreciation rate of the car as its previous owner.
    • Have you considered the possibility that with the same amount money you can purchase a high-end used car model than a low-end new car model? You could use the money to purchase a luxury used car model with advanced features from a top carmaker.

    Banks offer used car loans for most makes and models of cars as long as they are less than 5 years old and don’t exceed 8-10 years of age at the time of loan maturity. You can get a used car loan of up to 80% of the price of the car at an interest rate of 11-17% p.a. for a loan tenure of 1 to 5 years.

    What is the Eligibility Criteria for a Used Car Loan?

    Any salaried or self-employed person with a good credit score and steady income can apply for a car loan. The eligibility criteria for a used car loan is as follows:

    • The applicant must be 21 to 65 years old.
    • He or she must have a minimum annual income of Rs.2-4 lakh and minimum 2 years of work experience in the same field.

    The eligibility criteria for a used car loan can vary from bank to bank. Therefore, it is advisable to check your car loan eligibility to avoid rejection. Keep in mind, multiple loan rejections can affect your credit score negatively.

    What are the Documents required to apply for a Used Car Loan?

    The following documents can be submitted as identity, age, address, and income proofs:

    • Identity proof - Aadhaar card, PAN, and passport.
    • Age proof - 10th/12th school certificate and birth certificate.
    • Address proof - Utility bills like telephone bills and electricity bills, and ration card.
    • Income proof - The latest payslips, previous months’ bank statements, and IT returns.

    Ensure the details furnished by you in the car loan application form are correct so as to avoid rejection.

    What are the Features of a Used Car Loan?

    Banks offer up to 80% funding for the purchase of pre-owned cars. Pick a well-maintained used car that is less than 5 years old. Most banks don’t offer used car loans for discontinued models. Here are the important features of a used car loan:

    • Interest rate: The interest rate of a used car loan is higher than that of a new car loan due to the high maintenance and insurance costs. A used car loan interest rate is determined based on the age and make of the car.
    • Loan tenure: The tenure of a used car loan is usually 1 to 5 years which varies from bank to bank. The car must not be more than 5 years old at the time of purchase and must not cross 10 years at loan maturity.
    • Used car loan EMI: Loans are repaid in EMIs over a specified loan tenure. An online car loan EMI calculator can be used to get the total breakdown of your car loan repayment schedule in the form of an amortisation table. The table consists of EMI payments, interest payments, and outstanding dues after each EMI payment.
    • Processing fee: Banks charge a small percentage of the principal loan amount as fee for processing your car loan.
    • Prepayment fee: After 12 successful EMI payments, you can prepay a part or the whole of the car loan before the end of its tenure for which the bank will charge you a penalty fee called the prepayment fee. It is a small percentage of the prepayment amount.
    • Foreclosure: As the car acts as collateral for a car loan, when you default on your car loan, the bank will repossess the car and put it up for auction to compensate for the outstanding dues. This process is called car loan foreclosure.

    How to Apply for a Used Car Loan in Kerala?

    There are 2 methods of applying for a used car loan - online method and offline method. In the case of the offline method, visit the nearest bank branch, fill up a car loan application form and submit it along with the necessary documents for identity, income, age, and address proofs. In the case of the online method, visit the bank website to download the application form. Submit the duly-filled and signed application form along with the necessary document proofs on the website.

    The bank will verify the details furnished in the application form along with your document proofs. Your application will be approved or denied based on your car loan eligibility. Upon car loan approval, the principal loan amount will be transferred to your bank account immediately. For existing customers, some banks reward loyalty with perks such as pre-approved car loans, minimum documentation, and instant loan disbursal.

    Top Used Car Loans and their Applicable Interest Rates

    Here are some top lenders providing used car loans in Kerala:

    Bank Loan amount Loan tenure Rate of Interest
    HDFC Bank Up to 100% of the price of the used car or 3-6 times your yearly income 1 to 7 years as long as the age of the car at loan maturity doesn't exceed 10 years 11.50% p.a. to 17.50% p.a.
    State Bank of India Up to 2.5 times your net annual income 1 to 5 years 12.60% p.a.
    ICICI Bank Up to 80% of the price of the used car 1 to 3 years 10% p.a. to 17.65% p.a.

    In order to get the best used car loan deal, take the time to do some research. Compare various used car loan offers across the top banks on a reliable third-party website. Choose a used car loan with a low interest rate, a suitable loan tenure, a small-to-zero processing fee, and flexible loan repayment options.

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