Used Car Loans: All That You Need To Know

Owning a car has become a necessity in today’s fast-paced world, helping save time and money on daily commutes. With the rise in popularity of pre-owned cars in India, Muthoot Capital makes it easier to purchase a second-hand car with their Used Car Loans. These loans offer attractive car finance rates and flexible repayment tenures, making car ownership more affordable and accessible.

What is a Used Car Loan?

As the name suggests, a Used Car Loan is a type of financing specifically designed for purchasing pre-owned cars. Loan approval depends on various factors, including the age and condition of the vehicle, its Insured Declared Value (IDV), as well as the borrower’s credit score, income, and repayment capacity. These loans are typically available for tenures ranging from one to five years and may cover up to 100% of the car’s value, depending on the lender’s policies.

Benefits of a Loan for Used Cars

• Used cars cost less than brand-new cars. As a result, your EMIs will also be smaller and more affordable.
• Used Car Loans generally come with flexible repayment options ranging from 12 to 60 months.
• You can get up to 100% of the IDV of your car value (*Subject to criteria).
• Used Car Loans are convenient, affordable, and easy to avail.
• These loans come with attractive used car interest rates and special schemes that can meet your needs.
• Applying for a second-hand car loan online can lead to quick approval with minimum documentation.
• Get a loan under various income categories: income base, no income base, and asset proof base.
• These loans require low or no down payments.
• You can choose an affordable EMI scheme to suit your financial requirements.

Read More : Tips to Make the Used-car Loan Application Process Easy

Things to Know Before Applying for a Used Car Loan

Before applying for second-hand car finance, there are several important factors to consider to ensure a smooth and informed process.

• Credit Score: Your credit score plays a significant role in determining the loan terms, such as the interest rate and the loan amount. A higher credit score typically leads to better loan conditions, while a lower score might result in higher car loan interest rates. Be sure to check your score before applying.
• Loan Terms: Understand the loan tenure (the duration to repay the loan) as it affects both monthly payments and the total cost of the car. A longer term might reduce monthly payments but increase overall interest payments.
• Down Payment: A down payment can help lower your monthly payments and reduce the loan amount. The more down payment you make, the less you will need to finance.
• Interest Rates: Check and negotiate car finance rates to get the deal and save money over time.
• Vehicle History: Ensure the used car you are buying is in good condition. Consider getting a mechanic’s inspection and checking the vehicle history report to avoid unexpected issues.
• Loan-to-Value (LTV) Ratio:
  • The LTV ratio is the percentage of the car’s value you can borrow.
  • A lower LTV ratio means a smaller loan compared to the car’s value, which can result in better loan terms.
  • Lenders typically prefer an LTV ratio of up to 90% or lower for used cars, meaning you should aim to put down at least 10% of the car’s value upfront.

By researching these elements, you’ll be well-prepared to secure the best Used Car Loan.

Used Car Loan Eligibility Conditions

Before applying for a Used Car Loan, it’s important to ensure you meet the eligibility criteria to avoid rejection. Here’s a list of the eligibility requirements at top NBFCs like Muthoot Capital:

• Age: The applicant’s age must be between 21 and 65 years.
• Income: The minimum salary for a salaried employee should be a monthly income of at least Rs. 15,000. Self-employed individuals should have an annual income of a minimum of Rs. 1.5 Lakh.
• Applicant’s Profile: Salaried individuals, Self-employed professionals and Agriculturist.

Documents Required for Used Car Loan Application

Submit the following documents with your loan application:

• Valid Proof of identity: PAN Card/Passport/Aadhaar Card/Voter ID/Driving License – any one.
• Valid Proof of Address: Passport/Aadhaar Card/Voter ID/Driving License /Electricity or Utility Bill/Ration Card/ LIC Policy – any one.
• Proof of Income: Bank statement showing salary credit/Pay Slips/ITR/Form 16.
• Asset Proof: Latest receipt for land or building or house tax.
• Passport-size photographs of the applicant.

Used Car Loan Fees & Charges

When applying for a Used Car Loan, understand that it comes with some processing and other charges apart from the interest. Here are some of these charges:

• Processing Fee: A nominal, one-time loan processing fee charged on the loan amount. It is a non-refundable charge.
• Other Charges: Various other charges related to the documentation and processing of the loan are also charged, such as charges for documentation, stamp duty registration certificate collection, amortisation charges, etc.
• Loan Pre-Payment or Foreclosure Charge: In case you plan to repay the loan before its due date, you need to pay a nominal charge for prepaying the loan or foreclosure to compensate for the loss of interest for the lender.

Read More : Old Car Vs New Car

Summing Up

Muthoot Capital provides affordable and accessible second-hand car loans up to 100% of the car’s Insured Declared Value, ranging from Rs. 50,000 to 35 Lakh. Get easy repayment tenures up to 60 months at attractive Used Car Loan rates. Get in touch with us to find out more about Used Car Loans.

FAQs

What is a Used Car Loan? 

A Used Car Loan or second-hand car loan is a type of loan you can take to finance the purchase of a second-hand car. It is designed to cover up to 100% of the car’s Insured Declared Value, besides considering factors like the car’s age and condition.

What are the eligibility criteria for a Used Car Loan?

The eligibility for a Used Car Loan depends on factors like your age, income, and employment stability. Generally, applicants must be between the ages of 21 and 65 years with a steady income. Self-employed individuals must show proof of stable business.

What is the loan-to-value (LTV) ratio for a second-hand car loan?

The LTV ratio refers to the percentage of the car’s value that the lender is willing to finance. Muthoot Capital can offer up to 100% of the car’s Insured Declared Value (IDV). A lower LTV ratio often results in better loan terms and lower interest rates.

What is the interest rate on Used Car Loans?

The Used Car Loan interest rates can vary depending on the lender and your credit profile. It’s important to shop around for the best car loan interest rates to ensure you get the most affordable terms.

Can I get a Used Car Loan with bad credit? 

Yes, many lenders offer loans against cars to individuals with less-than-perfect credit scores. However, the terms might include higher used car interest rates. Improving your credit score before applying can help secure better loan conditions.

How long does it take to process a Used Car Loan application? 

The time taken to process a car loan application can vary depending on the lender and the documentation provided. At Muthoot Capital, the approval process for second-hand car finance can be completed instantly, with quick disbursements for eligible applicants.

Can I apply for a loan for a car that is over 5 years old? 

Yes, lenders do offer second-hand car loans for cars older than 5 years. However, the car’s condition and the loan-to-value ratio play a role in loan approval.

What are the documents required for a Used Car Loan application? 

For a Used Car Loan application, you will typically need to provide valid ID proof, address proof, income proof, and asset proof. Lenders may also require a copy of the car’s RC (Registration Certificate) and insurance details.

Are there any hidden fees in Used Car Loans?

Apart from the interest, there are standard Used Car Loan fees, such as processing, documentation, and pre-payment charges. Be sure to read the fine print and inquire about all possible charges before finalising the loan.

How can I reduce my EMI for a Used Car Loan? 

To reduce your EMI, you can either opt for a longer loan tenure or make a larger down payment. By increasing the down payment, you reduce the overall loan amount, which can lower your monthly payments and help you secure better Used Car Loan rates.