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Owning a car was once considered a luxury since not everyone could afford to buy one. Buying a car was a life milestone for many individuals who could shell out those huge amounts of money all at once to buy their dream car. With growing times, changing demographics and emerging car loan lenders, for a majority of the Indian middle class, owning a car today is no longer a luxury, but a necessity made possible by taking a car loan.

It’s difficult to imagine living without a car because that would restrict you from going to places for work, duties or leisure, hindering a good social and professional life. But with newer technologies and lesser resources, the cost of cars is on a rise, often making it extremely difficult for the average individual to purchase their vehicle outright only using one’s savings. Therefore, viewing the huge demand for financing both used and new cars, leading loan lenders in India offer car loans, which are floated products, which enable you to purchase your car and pay off the car loan amount borrowed bit by bit through car loan EMIs or instalments.

Top Pre-Owned Car Loan Providers

Credit ProviderInterest Rate (annual)Processing FeesLoan Amount OfferedLoan Tenure



2% of the loan amount or Rs. 15,000

Up to 80% of the valuation of the car

Up to 5 years

State Bank of India

11% to 12.00%

Rs. 1,000 to Rs. 1,500

Up to Rs. 10 lakhs

Up to 5 years

Axis Bank

14.80% to 16.80%

1% of the loan amount or Rs. 6,000

Up to 85% for the car’s valuation

Up to 5 years

Tata Capital

15% onwards

  • Refinance: 1.50% of loan amount or Rs. 6,000
  • Repurchase: 1.75% of loan amount or Rs. 5,000

Up to Rs. 50 lakhs

Up to 5 years

Bajaj FinServ

Contact Bajaj FinServ

Up to 4% of the loan amount (inclusive of taxes)

Up to 90% of car’s valuation or Rs. 20 lakhs

Up to 5 years


13.75% to 16%

1.50% or loan amount (min. Rs. 2,500; max. Rs. 5,000)

Up to Rs.2.5 crore

Up to 7 years

Mahindra Finance

Contact Mahindra Finance

Contact Mahindra Finance

Depends on the age of the vehicle

Up to 5 years

United Bank of India

  • Salaried: 8.70%
  • Non-Salaried: 8.85%

0.59% of loan amount (min. Rs. 600; max. Rs. 11,800)

Up to 75% of the car’s valuation or Rs. 40 lakhs

Up to 5 years

Indiabulls Dhani

13.99% onwards

3% of the loan amount onwards

Up to Rs. 15 lakhs

Up to 3 years

What are the Top Features and Benefits of Used Car Loans?

  • The loan amount you require will generally be lower because the cost of the car will be lower.
  • The repayment tenure will be lower due to the lower loan amount. This will help you save on interest payments.
  • The repayment tenure can be as long as a new car loan (depending on the bank). You can easily get a loan tenure of up to 5 years, or in some cases, even 7 years.
  • You can get up to 90%, or even 100% financing for your car.
  • The application process is simple and in most cases, similar to that of applying for a new car loan.

Important Points to Consider While Buying a Used Car

  • Study the vehicle history: Make sure that you conduct thorough research about the car before buying it. Several details of the car can be found online. It is important to check the vehicle history as well. This will help in checking if the car has had any accidents. You can also check the service history to see if the car has undergone any major repairs.
  • Verify the car and examine the papers thoroughly: You must check the car thoroughly. You can take the help of a mechanic to inspect the car. In case there are any issues, you can negotiate on the price or ask the owner to repair the car before purchase. You can also drive the car at a place where there is less traffic to check for any vibrations as well. All relevant documents including registration certificate and insurance copy must be checked thoroughly. Check if the chassis number and engine number is the same as the ones mentioned on the registration copy. It is also important to check the insurance papers carefully to see if the car has had any accidents.
  • Registration Certificate transfer: After purchasing the car ensure that the Registration Certificate (RC) is transferred to your name. The form for the transfer of RC must be signed by you as well as the previous owner. In case the car is registered at a different state, a No Objection Certificate (NOC) is required. A NOC is also required if the previous owner has purchased the car on finance.
  • Insurance transfer: Always ensure that the car has valid insurance. In case you buy the car, the insurance must be transferred to your name immediately. The insurance policy becomes void if it’s in the previous owner’s name, even if the RC is in your name.
  • No Claim Bonus transfer: The insured always receives the No Claim Bonus (NCB). NCB is never provided to the insured vehicle. Only the transfer of the insurance policy to your name is possible. You will not be able to transfer the NCB to your name. Therefore, you will have to pay the difference amount for the remainder of the policy period.
  • Get the car serviced before use: The car must be completely checked and serviced before initial use. Changing the required fluids, clean up, and required fixes must be completed before the first use. In case of any cracks or rust, you must get it fixed.

Important Points to Consider While Applying for Used Car Loans

  • Used car loans come with higher interest rates than new car loans.
  • The age of the car will be taken into consideration before approving your application. Usually, financial institutions insist that the age of the car should not be more than 36 months.
  • The cost of car insurance will not be included in your loan amount. You may need to take a higher loan amount to cover the cost.

Eligibility Criteria for Used Car Loans

Here are some of the common eligibility criteria for used car loans:

Age of the Applicant

Between 21 years and 65 years

Between 25 years and 65 years

Minimum Income

Rs.15,000 per month

Net profit of Rs.1.5 lakh p.a.

Income Status

At least 1 year of continuous employment

Should have been in the same line of business for at least 3 years

Age of the Vehicle

Less than 10 years at the time of loan maturity

Used Car Loan Tenure

Loan tenures for used cars are difficult to estimate. In some cases, the car might have already been used for some years. Loan tenures for used car loans heavily depend on the present quality of the car. However, since these factors are subjective, most banks/financial institutions limit loan tenures on used car loans.

Most lenders limit used car tenures up to specific or pre-determined years from the date of first registration or lend only for used cars which are used for below a certain number of years. Generally, used car loans have lower tenures than a new car loan, which can go for as many as 7 years.

Further, as interest rates on used car loans are higher than the new cars loans, it sometimes makes sense for an individual to clear off the loan as soon as possible to reduce the overall interest burden. This, in turn, reduces the loan tenure.

The Process to Apply for Used Car Loans

Various lenders across the country provide online and offline modes to apply for a pre-owned car loan. Here is a brief description of both the processes.

Applying for a Used Car Loan Online:

  • Go to the official website of the lending institution you plan to get your loan from.
  • Apply for the loan by entering the details requested. Usually, lenders ask for your basic contact details as well as details about the car you wish to buy.
  • Once you apply, a customer care executive will get back to you with further instructions.
  • Submit the documents requested for a hassle-free process.
  • The lender will verify your documents and approve the loan, after which you can use the funds disbursed to buy the car.

Applying for a Used Car Loan Offline:

  • Visit the branch office of the bank or lender from which you plan to take the used car loan.
  • Fill in the application form by providing details about the loan you wish to get.
  • Discuss details about the loan such as the eligibility, loan amount, car loan interest rate, etc. with a bank executive.
  • Once you decide the details of the loan, you can submit the necessary documents requested by the lender.
  • The loan amount will be credited to your account after the bank provides its approval.

How to Make the Loan Application Process Smooth?

  • It is important to do thorough research online while finding a lender that offers attractive interest rates and an easy application process. Many banks these days need minimal or no documentation for approval.
  • Opt for an online application process to save time on visiting the bank branch and waiting in the queue.
  • Try out a Car Loan EMI calculator to estimate the EMI amount you will have to pay. This will help you decide if you have to reduce the loan amount, increase the loan tenure, or make any other changes to make the EMI affordable. The online EMI calculator makes it easy for you to calculate, without the help of a bank executive.
  • Your documents must be kept ready when you have to make submissions. Any delay in submission of even one important document will lead to further delay.
  • Go for a well-established lender so that the application and approval processes are quick.

How to Choose a Used Car Loan?

Here are some of the factors that can help you in making the right choice as far as a used car loan is concerned.

  • Interest rates: Like any loan, one of the most important things to consider about a used car loan is the interest rate. Used car loan interest rates are higher than that of new cars and can range from 10-17 percent. On the other hand, interest rates on personal loans could range from 10.5- 22 percent. Also, personal loans would help you fund the entire amount of the car. When going for a used car loan, find out the interest rates being offered by different banks and financial institutions. Also, compare it with personal loan interest rates before making a decision.
  • Choosing the loan amount: When choosing a car, keep in mind how much you would have paid for a new car and then look for similar models of used cars. Try to keep the loan amount low and do not stretch your budget to buy a hi-end car whose used price may seem reasonable. Remember high-end cars also have a higher maintenance cost. So, it is important not to take a used car loan for a huge amount.
  • Make a larger down payment: Having chosen the loan amount, it is important to make a big down payment. Used car loans will give you a loan for up to 85 percent the price of the car. However, remember that used car loan interest rates are on the higher side. So, you will end up paying more interest. Also, a used car will cost less than a new car. When going for a used car loan, make as big a down payment as you can. This will keep your EMIs manageable.
  • Choosing the tenure: Used car loans mostly have a maximum tenure of 5 years, though some lenders may offer tenure of up to 7 years. However, make it a point not to extend your tenure too much. This is because since the interest rate is on the higher side, you will end up paying more as interest on a loan of a higher tenure. Try to keep your loan tenure within 3 years.
  • Use a loan calculator to find out your EMI: When taking a loan, it is important to get an idea of the EMI outgo every month. The EMI outgo should be such that you can make those payments every month without putting a strain on your finances. You can use a loan calculator for this purpose. Enter details like loan amount, tenure and interest rate and the calculator will show you details of your EMI.

Used Car Market – How it’s Shaping Up

  • Higher disposable income: As the disposable income of individuals increases, the periods of car ownership are reducing. The ownership periods earlier were around 7-8 years; however, it now stands at 4-5 years. So, more cars are being sold in the used cars market.
  • Better affordability of used cars: A car that’s been used for 2-3 years is available at around 60-70% of the on-road price of a new car. Improved technologies employed in the manufacturing of cars ensures that the car does not go down in quality even after the use of 2-3 years. So, you can end up getting value for your money by going in for a used car too.
  • Numerous used-car platforms: There are a lot of options available for the trade of used cars who offer added benefits like maintenance of the car, assurance of quality, warranty, financing and other added attractions like RC book transfer, etc. which makes the experience of buying a second-hand car much easier.
  • Changing perceptions: Buying a used car is no longer considered inferior with better players and added transparency in the market.
  • Multiple cars per household: With more individuals getting into the workforce and public transportation still in the developing phase in many cities of the country, purchasing two cars is becoming a norm in many households. Individuals prefer buying used cars as the second car.
  • Entrepreneurship opportunities: Ola and Uber are no stranger companies to us. As more and more drivers are turning entrepreneurs, there is increased demand for cars and often used cars are preferred due to the cost factor.
  • Easy finance: There are easier financing options available for used cars.

Used Car Loans FAQs:

1. Can I avail a pre-owned car loan on my existing car?

Yes. Some lenders will allow you to avail a used car loan on your existing car. One such lender is Tata Capital as it offers up to 120% of your car’s current value as cash. You can avail up to Rs. 20 lakhs under this facility.

2. Can I apply for a used car loan with a co-applicant?

Yes, you can apply for a loan to purchase a second-hand car with a co-applicant, but this is necessary only when your income does not meet the minimum income eligibility criteria. In such instances, your spouse or a relative who resides in the same address as you can be the co-applicant.

3. What is the maximum repayment tenure I can opt for my used car loan?

The maximum repayment tenure offered on pre-owned car loans is 84 months or 7 years which is offered by the State Bank of India (SBI). However, it is always recommended that you choose shorter repayment tenures because you will end up paying higher interest over the loan tenure. Shorter repayment tenures would mean higher EMIs but in the long run, it will help you cut down on the interest payable towards your car loan.

4. Will I be charged for prepaying a used car loan?

Yes, many lenders will charge you a penalty fee for prepaying your loan except for a few such as Indiabulls, United Bank of India, and Tata Capital who do not levy any penalty on prepayment.

5. How do I repay the used car loan I availed?

There are various ways through which you can repay your used car loan. They are direct debit, Electronic Clearing Service (ECS), and post-dated cheques (PDCs). Almost all lenders will allow repayment through any one of these ways.

6. Is there a restriction on the type of cars that I can purchase with the used car loan?

You can buy any kind of car such as sedans, hatchbacks, sports utility vehicles (SUVs), etc., with used car financing. However, lenders will check for the age of the car before offering you a used car loan.

7. Can I get a used car loan if my credit score is low?

Lenders generally look at your credit history to evaluate your repayment capabilities. Most lenders will offer you a loan only when your credit score is 750 and above. So, if you feel that your credit score is low, first confirm it by checking your score. Once you check your score, you can take corrective measures to enhance it and then apply for a loan.

8. Should I provide collateral or security to avail pre-owned car finance?

No, you do not have to provide any security or collateral to avail a pre-owned car loan as the vehicle itself will be considered as a security. In the event of you defaulting on your EMI payments, the lender has the right to seize your vehicle and recover the loan amount.

End Note

Used car loans are a very safe and certain way of purchasing your car. One of the topmost benefits of a used-car loan in India is that it is secured against the car itself, so, you do not have to mortgage your property or other assets to get a car loan. You also get to use your car while you are servicing the car loan term, so a few years down the line you have added to your original savings and have the opportunity to own the car having paid off your car loan completely.

Latest & Update Used Car Loan News

Piramal Retail Finance to Start Offering Used Car Loans3 May 2021

Piramal Retail Finance, a subsidiary of Piramal Enterprises has announced its expansion into the used-car finance segment. The company has stated that these loans will be focused on mid and small towns in India that do not have competitive loan produ...

Read more

Piramal Retail Finance, a subsidiary of Piramal Enterprises has announced its expansion into the used-car finance segment. The company has stated that these loans will be focused on mid and small towns in India that do not have competitive loan products. With this new announcement, Piramal Retail Finance now offers a total of seven loan products under its portfolio.

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