used car finance

Step By Step Guide To Getting A Mortgage Second-Hand Car Loan

The Indian pre-owned car market is on the up. It’s worth billions of rupees and growing at 15.12% annually. It even outperformed the new car market by 1.3 times in recent years. 

There’s something about pre-owned cars that makes them so endearing. They are affordable to purchase, run and maintain. You get all the features and brand value of a new car at a fraction of the price. Plus, a pre-owned car purchase can be easily financed. Here’s how.

Step 1: Choose the lender: 

Your second-hand car loan experience is directly related to the lender you choose. That’s because loaning is never a one-fit option. The cost of borrowing, tenures, repayment schedules and all other key aspects of the loan are lender-specific. They vary a lot from one lender to the other. It’s all about researching the market well and choosing sensibly. Here’s what to look for. 

    • First things first, know the lender’s credibility. Dig out the lender’s performance record, financial health, work ethics, and more from customer feedback and online resources. 

    • Determine the lender’s Loan to Value (LTV) ratio. Usually, lenders finance 85 to 90% of the car’s ex-showroom price or 85% of the on-road price. Knowing the exact LTV helps you plan well for the pre-owned car purchase.  

    • Know the lender’s systems and processes. Ideally, the lender should allow for online loan applications for your convenience. It must have broad eligibility criteria and easy documentations. The lender needs to be proactive in evaluating the vehicle, approving the loan and disbursing the loan amount into your account.       

    • Ascertain the overall cost of borrowing. Your cost of borrowing depends on the interest rates involved in the used car loan, along with processing fees, hidden charges, penalties, foreclosure charges and more. Prefer a lender that offers competitive interest rates, low processing fees and no hidden charges. Muthoot Fincorp fits the bill perfectly.  

Step 2: Choose the loan type:  

Once you have zeroed on the lender, it’s time to choose the loan type. The second-hand car finance comes in two options, secured (mortgaged) and unsecured. 

    • A secured loan requires you to pledge your property or valuables. Even the car you wish to buy can serve as collateral. It’s the commonest and most preferred of the loaning options, as interest rates are low and terms and tenures are more flexible. 

    • Unsecured loan spares you from the hassle of pledging anything. The lender covers the risk of default with higher interest rates, and tight tenures. You have to be at your convincing best to avail an unsecured loan quickly and affordably.    

Step 3: Choose the right tenure: 

The tenure is the timeframe in which the loan has to be repaid in full with interest. The second-hand car loan tenure ranges from 12 months to 7 years, depending on the car, loan type, LTV and lender. Note that, tenures are typically short in unsecured loans and for older cars. The car you wish to purchase shouldn’t be aged over 10 years at the end of the loan term. 

Go for a shorter tenure if you are comfortable with higher EMIs. That’ll help you save big on the interest outgo. On the other hand, longer tenures are suitable for buyers with an unstable income. The bottom line: evaluate your financial condition and choose the tenure accordingly.     

Step 4: Keep your paperwork ready: 

The lender might deny you the used car loan if the car’s registration certificate (RC) is not in your name. The standard protocol is to pay the seller a token amount and get the RC transferred before approaching the lender. That’ll boost your chances of getting a loan. Besides this, you need to keep in order some KYC documents, such as  

    • A recent passport photograph 

    • ID proof: PAN Card, Aadhaar Card, Passport, Voter Id card

    • Address Proof: Ration card, Passport, Aadhaar card, Utility bill 

    • Income proof: Previous two years’ ITR, 6 months Bank statements 

Step 5: Apply for the loan: 

Eventually, you are ready to apply for used car finance. This can be achieved either by visiting the lender’s branch or online. The latter makes sense, as it’s easy and quick.  

Online application: 

    1. Visit the lender’s website

    2. Type in the requested details 

    3. The representative will revert to you for further instructions 

    4. Submit the required documents 

    5. The lender will go through your documents for eligibility and approval

Offline application: 

    1. Visit the lender’s nearest branch

    2. Fill the application form 

    3. Submit the required documents

    4. The lender will verify your documents for eligibility and approval

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