Amidst the strict social distancing norms, individuals are looking for the best possible ways to avoid the crowd and eventually public transportation. Eventually, they are in search of affordable personal mobility options.
This is the primary reason the demand for second-hand cars has skyrocketed since 2019. As per a report, in FY21, India sold almost 4.4 million used cars compared to 2.7 million new ones. Additionally, the easy availability of second hand car loans also contributed significantly to this used car market boom.
However, if you are planning to purchase a second-hand car in the near future, you should know the available options to fund it.
Best ways for second-hand car financing
Following are the best ways to finance a second-hand car purchase:
- Conventional auto loan
Individuals can fund a second-hand car purchase with a car or auto loan. Typically, it is a secured loan, and individuals need to collateralise their cars to avail of funds.
However, since this credit product is curated especially for new cars, lenders approve lesser loan amounts or impose higher interest rates when opted for a second-hand car.
Besides, the loan amount and eligibility for this fund depend on various factors like car’s
- Kilometres covered
- Current on-road valuation of the car to be purchased
- Third-party car insurance status
Moreover, after assessing the eligibility, lenders sanction only 80% to 90% of its current on-road price.
- Personal loan for a second-hand car
Alternatively, individuals can also opt for a dedicated second-hand car loan from leading financiers. It is a personal loan, especially for second-hand car financing. Therefore, individuals do not have to collateralise their cars to avail funds.
Besides, the following are the features and benefits of a used car loan:
- High loan value
A personal loan for a used car accompanies a large loan corpus. Unlike a traditional car loan, it allows borrowers to cover the total cost of purchasing a used car. Additionally, the eligibility criteria are simple, and they need to submit only a handful of documents.
- No restrictions on end-use
Another advantage of a pre-owned car loan is that it does not have any restriction on end-use. Therefore, car owners can utilise the funds for any purpose other than purchasing the car. For instance, they can buy new car accessories, install additional safety gear, etc.
- Affordable interest rates
Individuals can compare different lenders to secure a reasonable interest rate for a personal loan for a used car. Additionally, a good credit score can help you get better terms on your personal loan for a used car.
However, individuals can also use an online personal loan EMI calculator and check the monthly instalments for better estimation.
- Flexible tenor
When you opt for a personal loan to purchase a second-hand car, you can choose a tenor of up to 60 months. It allows borrowers to keep the repayment burden lighter.
However, they should also know how to find the right personal loan tenor that works for them.
- Faster processing
Since there is no collateral, lenders take minimal time to process a second-hand car loan. However, to maximise the benefits, individuals can apply online.
Selected NBFCs like Bajaj Finserv also provide pre-approved offers that make loan processing hassle-free and saves time. Besides personal loans, such offers are also available on business loans, credit cards, etc. All you have to do is enter your name and contact number to check your pre-approved offers online.
- Flexi loan facility
Unlike a conventional second-hand car loan, individuals can also enjoy the Flexi loan facility on a personal loan. It enables borrowers to choose interest-only EMIs and repay the principal at tenor’s end. Hence, with this facility, used car owners can reduce their EMI burden to a great extent.
Due to the reasons mentioned above, a second hand car loan proves to be one of the best ways to finance this purchase. However, individuals should also consider other funding options to make an informed borrowing decision.