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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.
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
14.80% to 16.80%
1% of the loan amount or Rs. 6,000
Up to 85% for the car’s valuation
Up to Rs. 50 lakhs
Contact Bajaj FinServ
Up to 4% of the loan amount (inclusive of taxes)
Up to 90% of car’s valuation or Rs. 20 lakhs
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
Contact Mahindra Finance
Depends on the age of the vehicle
United Bank of India
0.59% of loan amount (min. Rs. 600; max. Rs. 11,800)
Up to 75% of the car’s valuation or Rs. 40 lakhs
3% of the loan amount onwards
Up to Rs. 15 lakhs
Up to 3 years
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
Rs.15,000 per month
Net profit of Rs.1.5 lakh p.a.
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
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.
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:
Applying for a Used Car Loan Offline:
Here are some of the factors that can help you in making the right choice as far as a used car loan is concerned.
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.
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.
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...
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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