How to apply for a loan while buying a used car

Used cars are high in demand. With personal mobility gaining more preference, used cars are witnessing increasing demand and at times, the market is even throwing challenges to new car sales. While many consumers are assessing buying a used car instead of shelling out money for a brand new car, choosing the right used car could be a tricky affair.

While buying a brand new car can cost a consumer a hefty amount at a time when the price of new vehicles is rising rapidly. Used cars prices in India too are increasing but at a slower pace. This often prompts the used car buyers to take loans from banks or NBFCs.

The new car loans usually come with a maximum repayment period of up to seven years, whereas a used car loan repayment period depends on the car's age. The majority of the public and private banks along with the NBFCs offer used car loans to their customers. However, terms and conditions for a used car loan may be different from new car loans.

Here is how to apply for a loan to buy a used car.

Select the seller

Used cars can be purchased in two ways - directly from the owners or from used car resellers or dealers. In case, you purchase a used car from an owner directly, you have to take care of all the paperwork and hassle. Some banks and NBFCs offer used car loans at discounted interest rates when you buy a used car from a certified reseller. In these cases, the reseller or dealer takes care of all the paperwork and helps in getting a loan from their associated lenders.

Plan your budget

Before buying a used car, always plan your budget appropriately. Figure out the amount of money you would be comfortable shelling out before buying the car. It is always advisable to go for a car loan that you can easily avail yourself of and which won't be a burden on your financial health.

Condition and age of the used car

One should buy a used car to check if it is in decent condition and require minimal maintenance. Don't just buy a used car for the sake of having a vehicle even if it is not in good condition. It may impact your operational expenses in long run. It makes no sense to buy a used car that may come with recurring issues. Besides, the condition also checks the car's age before buying. Usually, it should not be more than seven years old, as otherwise, the potential for repairs and replacements could be higher. Lenders consider the car's age before giving a loan.

Choosing right lender

After selecting a car, you need to check the lenders from whom you want to take the loan. You can compare multiple lenders to get the best deal based on the interest rate, loan margin, processing fees, repayment tenure, etc. Check the lender's eligibility norm and applicable terms and conditions as well.

Submit documents for the loan

After choosing the lender, when you approach them for a used car loan, they would seek a wide range of documents from you. These include identity proof, address proof, income proof, proforma invoice, copy of the seller's RC book, a copy of motor insurance from the seller, etc.

How to avail a used car loan

Step 1 :

Select the seller

Step 2 :

Plan your budget

Step 3 :

Condition and age of the used car

Step 4 :

Choosing right lender

Step 5 :

Submit documents for the loan