What should you pay attention to when taking out a used car loan?


Sumit Garg, co-founder and managing director of Luxury Ride, a showroom in India for used luxury cars, said that due to covid-19, many buyers are choosing to buy cars from the market. opportunity instead of news. They feel more secure when using their own vehicle to get around.

Therefore, before you decide to buy a used car, there are some crucial steps you should consider, especially around the financing and documentation process.

Select the type, make and model of the vehicle: The first step is to categorize the type of car you want to buy. Amit Kumar, Director of OLX Autos India, said: “If you are a first-time buyer of a used car, an entry-level car would be a good choice for you, especially if you are on a tight budget. The period of ownership of cars has been reduced from 7 years to 4 years; Therefore, if you are buying a used car for the first time or are planning to do so in the future, you can start with an entry-level car and gradually move up to a larger car in a few years. used car, you should stick to an appropriate range, including the purchase price and the annual maintenance cost.

“There are many online platforms available to compare cars within your budget to get a good deal. As a general rule of thumb, you should be prepared to increase your budget by up to 10% if you get a car that is priced higher but meets your needs, ”Kumar said. Keep a close eye on the age and condition of the car you are considering. to buy, as banks may not be willing to give a loan if the vehicle is more than 2-3 years old. “Factors such as number of kilometers driven, user profile, location of use, accidents or modifications to the vehicle, etc., should be checked. You can always ask for service history and odometer records when buying a used luxury car, ”Garg said.

Once you’ve decided on the car you want to buy, find a lender who can help you finance your used vehicle. “Companies that sell used vehicles typically have partnerships with various fintechs and banks to help buyers get financing quickly,” Garg said.

While deciding to get a loan sanctioned on a used car, you should try to pay a large part of the cost yourself as this can save a significant amount of money compared to using a car loan. used car on the total purchase value. of the car.

Therefore, if one chooses to avail a used car loan, the following considerations should be weighed:

Carefully review loan offers: These days, it is relatively easy to avail a used car loan from banks, NBFCs (non-bank financial companies), fintech platforms and dealerships. But before you focus on a loan offer, compare the interest rates offered by banks to see if they offer a fixed or variable interest rate.

Kumar said, “In general, a fixed interest rate is useful because it helps you avoid interest rate fluctuations. Also look for any additional fees or charges, and whether the bank or NBFC approves the used car you selected and whether or not prepayment flexibility is offered as an associated cost. “

The interest rates for used car loans tend to be slightly higher than those for a new car. Garg said, “The interest rate can change depending on the buyer’s credit history, type of vehicle, customer profile, etc. Currently, used car loan rates start from 10%, while new car loan rates start much lower at 7.5%. Lenders can charge a processing fee, which can vary between 1% and 3% of the value of the car. “

However, you can compare a pre-approved personal loan to a used car loan, because often a personal loan is cheaper than a used car loan. Additionally, a personal loan can be relatively easy to obtain and may incur lower processing fees.

Documentation: All required documents should be checked such as Car Registration Certificate (RC), Insurance, No Objection Certificate (NOC) and Controlled Pollution Certificate (PUC).

Additionally, you will need Forms 29 and 30 which work together to notify the Regional Transportation Office (RTO) that ownership of the vehicle has been transferred. “When purchasing a car, both forms were submitted to RTO. This process must be completed within two weeks of purchasing the car, ”Kumar said.

If the car’s RC has a financial mortgage (this means you pledged your car to a bank until your car loan ended), the seller must pay back the loan amount, get the AC and the Bank-stamped Form 35, and share that NOC amount with you. Also check if an e-challan is pending with the seller. If so, it must be paid before the car is sold to you.

“In case you are purchasing an interstate car, ask the seller or car owner to get a NOC from the state of registration so that you can re-register the car’s receipt from the NOC,” said Garg.

Always make sure that you have transferred the seller’s insurance policy to your name immediately after purchasing the car.

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