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Comparing used car loans - What features to look for?

You've been seeing that used car for some time now, and want to own that comfort. You are short of money, so the used car dealer recommended a car loan as a means for purchase. What do you do? You make sure you got the best car loan deal in the market. How do you do that? Compare car loan offers from different lenders, and weigh your option. What do you look for? You look for features mentioned below to weigh the factors carefully, and make a decision.

  • Interest Rate

    Interest rates offered to you may differ from lender to lender depending on factors such as your income, etc. Compare the interest rates offered, and narrow down to the best possible options to make sure your car costs less.

  • Processing Fees

    Processing fees may seem to be a small outgoing, but when added to the cost of your loan, you may feel the pinch. Therefore, look for processing fees that will not drill a hole in your pocket when you finally take a car loan.

  • Equated Monthly Instalments

    Equated Monthly Instalments or EMI is short stands for the amount you pay each month to repay your loan. This however depends on the tenure of your loan, and the interest amount payable. Longer the tenure, lower the EMI, but the interest you pay will be higher in the long run. Look for comfort while selecting EMI plan.

  • Down Payment

    Check the percentage of the car cost that your lender will extend you as a car loan, and how much money you will have to pay as down payment for the purchase of that used car on a used car loan. Check the offers, and make the right selection.

  • Loan Processing

    The approval of your car loan request will depend on the process the lender uses to approve your car loan request. A simple and easy process will have you owning the used car you want to purchase far more quickly.

  • Car Model

    Get the model right, since banks and other financial institutions charge interest rates that vary in accordance with car models. Making the wrong model choice could only have you paying more than you really want to.

  • Prepayment or Foreclosure Charges

    You may want to at some point of time, pay-off your loan earlier than when your loan tenure expires. In such a case, you may have the option to prepay or foreclose your existing used car loan. Car loan prepayment or foreclosure terms differ from lender to lender, and making sure in advance will save you the shock of having to pay a prepayment charge.

  • Additional Features

    Additional features differ from lender to lender. Some offer personal accident cover, while some permanent disabilities cover, and so on and so forth. Check for such offers, as this may help you add some add-on benefits to your used car loan deal.

Go ahead and compare your car loan features for the best deal to suit your used car loan needs. You know your pockets best!

How to manage repayments

Managing car loan depends on managing your car loan repayment, since this could mean extra charges as late fees, etc. You can reduce the chances of default on your car loan repayment if you plan well. This means, you need to plan in advance, an EMI plan you are comfortable with. Here are some pointers at managing your used car loan repayments much better.

  • Account for all Debts

    List every single debt with a list and details of repayment including schedules. Don't exceed 50% of your monthly income in repaying your total monthly commitments.

  • Research Best Offer

    Carrying out intensive research to select the best loan will help you choose the right product with the best EMI plan on offer.

  • Choose Low EMI Plan

    Higher interest outgoings increase your EMI. Look for an optimized EMI plan, which leaves you free from default of late payment.

  • Calculate your EMIs

    Use an online Used Car Loan EMI Calculator to make accurate calculations in respect of EMI payable to select the right plan.

  • Select a Good Used Car Loan

    Analyse the how taking a used car loan will affect your finances in the end. Make a match according to your needs.

  • Choose a Loan with Prepayment Options

    Keeping your options open will be the right approach to select the right type of used car loan. Check and select a loan product, which offers you the best prepayment option.

  • Pay you EMIs Punctually

    Penalties are fines or punitive charges on late EMI payments. This could also affect your Credit Score in the loan run. Schedule your repayments.

  • Strategise Multiple Loans Repayment

    If you do have more than one existing loan, take the utmost caution and schedule you repayments strategically to stay safe.

  • Change your Lifestyle

    Reschedule the expenses in your daily life to adjust and manage your used car loan repayment to save in the end.

Review regularly your repayment plan to help keep out of trouble.

Traps to watch when buying a Used Car

Buying a used car on a used car loan can be tricky if you don't avoid traps that could be your own making. A few traps are listed below.

  • Failing to Shop your Financing before you Shop for a Vehicle

    Your down payment plus your loan cash makes up the total payment for the purchase of a used car. You could end-up paying more if you go shopping for a vehicle without knowing your finances. Avoid this trap by shopping your financing first.

  • Buying on your First Visit to a Dealership

    Car dealers make more money when customers drive off with a vehicle on their first visit. Shop for deals while looking for a used car, and don't hesitate to look for another dealer to compare what's being offered.

  • Buying a Used Car without Negotiating

    Having narrowed down on the used car you want to purchase, you're making a mistake if you take the deal without negotiating a better price and better terms and conditions. Don't take everything at face value.

  • Thinking a 'SALE' Sign means Automatic Savings

    A banner outside a used car dealership does not necessarily mean bargains, or savings. These are just a few sales promotion tools that help the dealership outlet look busy, and attract business.

  • Ordering a Vehicle without Shopping the Exact Same Vehicle

    You might after purchasing a used car feel that you've been duped when you see another of the same car model up for sale at bargain that was not offered to you. Shopping for the exact same vehicle elsewhere will help you keep that feeling at bay.

Eligibility Criteria for a Used Car Loan

Eligibility criteria for a used car loan for salaried and self-employed persons vary, and are as mentioned below.

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    Salaried Employees

    • Age Limit: 21-65 years
    • Income: Rs.15,000 per month
    • Income Stability: At least 1 year in current organisation
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    Self-employed Individuals

    • Age Limit: 25-65 years
    • Income: Profit of Rs.1.5 lakhs per year>
    • Income Stability: Same line of business for at least 3 years

Documents required for Used Car Loan

To avail a used car loan, the following basic documents will be required to prove your eligibility.

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    Application form

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    Passport-size photographs

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    Car valuation report

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    Identity Proof

    • Aadhaar Card
    • Driving License
    • Passport
    • Voter's ID
    • PAN Card
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    Residence or Address Proof

    • Voter ID
    • LIC Policy
    • Electricity Bill
    • Aadhaar Card
    • Driving License
    • Ration Card
    • Passport
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    Proof of Income

    • Profit and loss account
    • Balance sheet
    • Audit sheet
    • Form 16
    • Salary slip
    • Bank statements

How to avail Used Car Loan?

Just follow these simple steps to get a used car loan.

  • Choose your Car

    Make a visit to a good pre-owned car dealer with a good record and recommendations. You may find a good deal online too, other than among your friends, family, and acquaintances. Online marketplaces offer a wide range of pre-owned cars, with good terms and conditions and add-ons inclusive of money-savers.

    Check your eligibility for a used car loan and select a lender with the best offers to suit your needs. Check the down payment structures, interest rate available, and loan tenure, percentage of loan available, extra charges, and terms and conditions before you select the right car loan and EMI plan. Keep basic information such as car model, price, your income details, and documentation at hand.

  • Application

    Once you've selected a bank or an NBFC for a used car loan, go to the lenders portal, and study the application process in detail. Most lenders provide form fields in the online application form with other conveniences. Complete the form filling and submit as required.

  • Finalize the Loan

    Finalizing your car loan would require you to discuss and clarify your doubts and queries with the lending institutions' representatives. While discussing the fine print, don't forget the rate of interest, processing fees, additional charges, loan value, loan tenure, and the EMI plan. Pay attention to the prepayment or foreclosure terms and conditions.

  • Submit Documents

    Most lenders will not require you to produce a long list of documents, except a few basic like application, identification, and address proof, etc. Submit the required documents to your lender, and you're done with the application.

  • Approval and Disbursal

    Once the bank or NBFC checks, verifies, and approves your loan, you will be informed about the disbursal of the loan amount, and the signing procedures. The lender may transfer the amount to your bank account, or choose to transfer the same directly to the car dealer. In either case, you can drive away with your own car.

Used Car Loan Tips

You might find that financing a used car, not so easy compared to a new car loan. Here are some handy tips for financing a used car.

  • Know your Credit Score before going to the Dealership

    Credit scores are a three-digit numeric calculated from the entries in your credit report. This number has the ability to influence a lender's decision that has relation to your loan value, interest rate, and loan tenure. Higher the score, better the terms and conditions offered by a lender.

  • Get Financing Quotes

    Research though the available dealerships by asking for quotes from several inclusive of car financiers. Compare the figures for best deals and offers available by checking parameters such as loan value, interest rates, and loan tenures.

  • Keep the Term Short

    Longer terms denote longer monthly repayment periods, which entail the benefits of saving money in the long run. Short tenures mean you pay off the loan faster, but with higher rates of interest, but lesser total interest on the loan. Optimize your plan to get the best out of the loan tenure and the available interest rate.

  • Optimize your Down Payment

    Most experts recommend you put down a payment of at least 20% of the car value. This would mean that you would receive the remaining 80% as finance from a lending institution. A larger down payment calls for lower interest rates to consequently save you money in the long run.

  • Pay other Fees in Cash

    Fees and charges are additional expenses you incur on availing a used car loan. Make an effort to make these payments in cash. Adding these extras to your loan value will only mean increasing the outstanding loan amount, which in turn will mean additional interest payable.

  • Time your Used Car Loan

    A well-informed person has the ability to avail incentives that time offers. Interest rates on used car loans fluctuate depending on market and economic conditions. Time your car loan for the lowest expected interest period.

  • Get a Co-Signer

    Someone looking for credit for the first time may have difficulty since records of loan repayment have not yet been compiled. This does not go to say that a secure job, high income, and other positives will necessarily fetch you a good deal. Try getting a co-applicant with good credit history to positively impact the interest rate offered on your used car loan.

  • Avoid What you Don't Know

    Check everything that you don't know, and avoid anything that you don't understand. Include dealerships and lender in your 'to avoid' list. Avoid signing the loan agreement if the details seem unclear. Don't jump into committing yourself to sticky situations.

  • Limit Late Payments

    Don't make a habit of late payments, since you are likely to increase the cost of your used car loan, since late payment penalties as applicable will apply. Late payments also affect your credit score.