A used car loan as the name suggests, is a loan offered to buyer for purchasing a pre-owned car. Some financial units, lenders, banks etc. provide pre-owned car loans for only passenger cars, while few may allow funding for commercial vehicles as well.
Tip: You can utilize the used car loan EMI calculator to know the EMI amount to be paid over tenure until the repayment of the loan.
Essentials about Pre-Owned Car Loans
Here is all you need to know about taking used car loans, the amount you can borrow to eligibility for obtaining the loan, age limit of seeker/vehicles, documents needed, and more.
- Loan Amount Disbursed
You may be able to receive 50% to 85% of the on-road price/market value of the pre-owned car. If your income does not suffice to meet the loan amount you need, then get a co-applicant who has sufficient income, to satisfy the amount of loan you require.
- Age Limit of the Loan Seeker
Minimum age of the person can be between 21 and 24 years (at the start of car loan application), considering he/she is salaried, self-employed or holds other types of profession. The age limit of the individual (till the end of repayment) can vary between 60 and 65 years.
- Age of the Vehicle
Most lenders disburse used car loans for vehicles not more than 5 to 10 years of age (till the completion of loan tenure).
- Repayment Options
Banks and lenders may permit a repayment tenure between 12 to 60 months (1 to 5 years, in some cases up till 7 years) with different EMI options (EMIs increase/decrease gradually or annually, pre-payments in parts etc.). You can borrow up to 80 to 85 percent of the used car valuation. Depending on the lender, the repayment tenure and borrowing amount can differ.
- Documents Required
NOTE: The documents required may differ as per the pre-owned car loan seeker status: salaried, self employed (Sole Proprietorship/ Partnership Firms/ Private Limited Companies/ Public Limited Companies), and others.
- Age Proof: Any one of Voters ID card, Passport copy, Photo driving license with birth date, PAN card, Ration card with date of birth and photo, school/college leaving certificate, or employer ID/certificate.
- Income Proof: You need to have the latest salary slip, and latest form 16 etc. Salary statement of last three months from your bank account.
- Identity Proof: PAN Card, Photo driving license with birth date, Voters ID card, or Photo ration card with date of birth.
- Sign Verification Proof: DOB given Photo driving license, Passport copy, Banker’s verification, Credit Card statement with the copy of Credit Card, Copy of the margin money you have paid to bank.
- Address Proof: Either Photo driving licence with birth date, Telephone bill, Credit Card copy with respective statement, Passport copy, Employer certificate/ID, or Electricity bill.
Things to Keep in Mind While Buying a Used Car
Here are some factors to consider while purchasing a pre-owned car:
- Decide a Budget: You can draw a rough idea about the amount you can spend for purchasing a pre-owned car, so that you do not go overboard with your finances. Try to hit on a suitable bargain.
- Dealer Choice: You can either purchase from a dealer or an individual. These days you can even check online for dealers and people that sell used cars. Refer certified pre-owned vehicles, as these may come with extended warranty along with the original manufacturer warranty.
- Select the Vehicle Model: There are a variety of car models to choose from. Note all the specifications of the automobile you want to buy, and preferably take the one that is comparatively newer.
- Health of the Car: Make sure the vehicle is in shape and does not require too much of a repair. The car must be in a smooth condition, so that it does not incur any overheard charges to make it run on the road. Do not avoid a test drive.
- Service History: Check for the service reports of the car. It will be better to own a car that has been serviced at authorized centres, having a history.
- Insurance Claim Check: You can request the insurer to check if the vehicle had any claim registered in the past.
- Sort the Paper Work: Assure the paper work is clean. Get the registration book (shows the vehicle’s date of registration), taxation book (status of tax paid), invoice (chassis no., engine no., date of delivery, etc.), PUC certificate and other important documents from the seller.
- Transfer Ownership: The original owner has to inform the RTO where the car was registered at, about the transfer. The seller must send a letter with details of the purchaser within 14 days.