How To Apply For A Used Car Loan

Most lenders in India – banks and non-banking financial companies provide used car loans for the purchase of used cars. With the growing demand of personal transportation in India, many individuals have started to opt for purchasing a pre-owned vehicle, and financing options have made it accessible for a wide range of budgets. 

Whether you are looking to buy your first car or upgrade to a newer model, securing a used car loan involves understanding the eligibility criteria, gathering the necessary documents and choosing the right lender. Before approving a used car loan application, lenders primarily consider the age of the used car. The aim is to provide you with a comprehensive and step-by-step overview of the process, empowering you to navigate the loan application process with ease and confidence.

Step1: Choose A Used Car Loan Provider

Used Car Loan providers are aplenty. You can easily find the money, but what is required is the perfect deal that will suit your budget. Good loan providers often offer a paperless journey, attractive interest rates, and are also transparent about the charges and have tie-ups with reputed auto dealerships. This enables a seamless transaction. Certain lenders provide loans up to 100% of the car’s value. Most banks and NBFCs will provide loans and self-employed and salaried employees can avail themselves of a used car loan.

Do a thorough research online to check for a lender that can provide a used car loan at low interest rates coupled with a suitable tenure. Opt for an online application process as it helps in saving time. Use a car loan EMI calculator offered by banking websites to check for monthly payments. It is easy and simple to use and basic details such as the tenure, loan amount, processing fee and interest rate must be entered. At the end, make sure to choose an established lender so that the loan process is very quick.

Step2: Check Used Car Loan Eligibility

Checking your eligibility for a used car loan in India is the crucial first step in the process. Lenders have a particular set of criteria that applicants must meet to qualify for the used car loan. These criteria often include factors such as age, income, employment status, credit history, and residency. Before you apply, it is essential to review the eligibility requirements set by different lenders to ensure you meet the necessary qualifications. 

The eligibility criteria that must be met for salaried employees and self-employed individuals will vary and are mentioned below:

Salaried employees

• These include doctors, CAs, employees of private limited companies, employees from public sector undertakings, including central, state and local bodies
• Individuals who are a minimum of 21 years of age at the rime of applying for the loan, and no older than 60 at the end of the loan tenure
• Income: At least Rs.15,000 per month
• Income Status: You must be working in the current organization for at least a year

Self Employed Individuals (Sole Proprietorship)

• This would include self-employed proprietors in the business of manufacturing, trading or services
• Individuals who are a minimum of 25 years of age at the time of applying for the loan and no older than 65 at the end of the loan tenure.
• Those who have been in business for a minimum of 3 years
• Should earn at least Rs. 2,50,000 per annum

Self Employed Individuals (Partnership Firms)

• This includes self-employed partners in the business of manufacturing, trading or services
• Individuals who earn at least Rs. 2,50,000 per annum
• Those who have a minimum turnover of Rs. 4,50,000 per annum
• Individuals who have a residence or office telephone line. A post-paid mobile phone that is a minimum of three months old is acceptable if only one landline is available.

Self Employed Individuals (Private Limited Companies)

• This includes individuals who own a private company in the business of manufacturing, trading or services
• Should earn at least Rs. 2,50,000 per annum
• Individuals who have an office landline

Self Employed Individuals (Public Limited Companies)

• This includes directors in public limited companies that are in the business of manufacturing, trading or services
• Should earn at least Rs. 2,50,000 per annum
• Individuals who have an office landline

Step3: Select Your Desired Loan Amount And Tenure

If you choose to buy a used car and are short of funds, a second-hand car can be a budget friendly option. You can choose your loan amount based on factors such as your eligibility, employment status and your ability to repay the loan. Depending on these factors, a lender can offer up to 80% of the valuation of the four-wheeler as second hand car finance. Most lenders offer such loans for up to 5 years.

The loan tenure can be determined by your monthly budget and the amount that you can comfortably spend on loan payments. If you are financially secure, you can opt for a shorter tenure with higher EMIs. However, you also have the option of opting for a longer tenure, which results in more affordable EMIs.

Step4: Complete Used Car Loan Documentation

There are several documents required for the used car loan procedure and it depends on your employment type and business. Some of the general documents which are necessary to apply are the application form, registration certificate of vehicle and KYC documents.

Purchasing a used car in India includes some vital processes such as loan approval, loan disbursement, down payment and hypothecation documentation. Banks can offer up to 80-85% of the total value of the used car for a loan tenure of 1 to 5 years provided the total age of the car and the loan tenure doesn’t exceed more than 8-10 years. When you approach the bank for a used car loan, the bank will appoint an expert for the valuation of the car.

You will have to make the down payment and pay the differentiation amount out of your own pocket. Visit the bank website, download the car loan application form, fill it up and submit it along with the necessary documents such as identity proof (Aadhar card and passport), age proof (PAN Card and Driving License), income proof (Form 16, last 6 months bank statement and payslips), and address proof (utility bills and ration card). The bank will verify the details and process the used car loan application. Once approved, the loan amount will be disbursed to your bank account in a short period of time.

By following these mentioned steps and staying on top of your loan payments and vehicle maintenance, you can enjoy your newly purchased car while effectively managing your car loan.

Summary

In today’s scenario, many banks and financial institutions in India offer several loan options for you to buy a used car. As a borrower, it is your responsibility to ensure you follow the right steps in order to ensure you get the best used car loan offer. You need to understand factors such as your eligibility criteria, gather all the necessary documents, and select the right lender. 

Once you have narrowed down the make and model of car you wish to purchase, look for used car loan offers across the top lenders in the country. Compare various used car loan offers and choose one with the lowest interest rate, zero processing fee, a suitable loan tenure, and flexible repayment options. These steps will ensure you get the best used car loan offer and you can make your purchase with utmost confidence.

FAQs About Used Car Loan Application