Buying a car may be a thrilling experience. And if you are seeking to buy a second-hand car, you will need to have your finances in order. Check out these six crucial points that you must consider in order to get a better bargain on a loan on used cars.
1. Review Your Credit Score
A credit score is a numerical representation of your capability to repay a debt. The higher your credit score, the more likely your loan on an old car would be approved. The lending institution evaluates your credit score while reviewing your profile and ensuring that you meet the minimum used car loan eligibility requirements. Creditworthiness is the vital factor that helps decide on your loan approval and interest rate. In addition to your credit score, the lending institution also checks your debt-to-income ratio.
If you want to calculate your debt-to-income on your own, use the formula outlined below.
Debt-to-Income Ratio: Monthly Debt Payment ÷ Gross Monthly Income
2. Find your Desired Used Car
When you start looking into the used car market, you will find that there is a wide range of options to choose from. Different models, variants, and features make it difficult for you to choose your ideal car. As a result, it is essential that you seek the advice of an expert or enlist the assistance of a professional mechanic before choosing an ideal car. It is also advised that you should visit your preferred dealership and take a test drive on your favourite used car. In addition to that, you must also consider your budget. Never outstretch your budget just because the lender has provided you with a preapproved loan on an old car offer.
3. Research on Used Car Lenders
Are you aware of the various factors that set apart the used car lenders from each other? It is their interest rates and offers. The minimum and maximum loan amount, maximum repayment term, interest rate, and seasonal offers vary from one lending institution to the next. As a smart borrower, it is your duty to do an extensive study on the many funding possibilities accessible from various financial institutions in the market. In addition to that, the used car loan eligibility also varies from one lending institution to the next. In order to get the competitive interest rate, take the help of a loan on an old car aggregator and compare the offer on a single webpage.
4. Understand the Valuation of the Pre-Owned Car
Do you realise that the majority of a car’s value depreciates during the first year after purchase? If you are not already aware of this information, do so immediately. The value of a used car is determined by various criteria, including the number of kilometres driven, whether the vehicle is used for commercial or personal purposes, and whether the vehicle has been modified in any way that goes against the manufacturer’s recommendations. Lenders consider all of the previous aspects when approving your loan on an old car to ensure that your car is valued fairly.
5. Know the Loan on Old Car Amount
Before you apply for a used car loan, it is important that you know the minimum and maximum amount you are eligible for. If the car that you have chosen is of higher value, but the amount that your lender is offering to purchase that car is much less, you may want to reconsider your choice. Usually, most lending institutions offer used car loans in the range of Rs. 50,000 to Rs. 50 lakhs. If you are looking for a top-up loan, the maximum lenders will lend up to 175% of the Loan to Value (LTV) of your existing used car loan. So, in order to get the perfect deal, don’t forget to consider this aspect. Apart from the loan amount, you must also check the interest rate and repayment tenure offered by your lender.
6. Make Sure All the Necessary Documents are in Order
In addition to the used car loan eligibility, you must also check the list of documents required by your lender to process your loan. Apart from the basic KYC documents, you must have the following car-related documents.
- Registration Certificate: The registration certificate consists of all the crucial information related to the car. It includes details such as the vehicle’s chassis number, engine number, and place of registration, among other things. RC ensures that the used car you are purchasing is not stolen.
- Pollution Under Control (PUC) Certificate: PUC certificate ensures that the car you are purchasing emits pollution that is well within the level prescribed under the MV Act of 1988.
- Other Documents: You will also require documents such as a No Objection Certificate (NOC), insurance papers, service record book, road tax receipt, etc.
All you have to do to make the process of getting a loan on old cars go well is keep the above points in mind. It will assist you in obtaining speedy approval while also providing you with a low-interest loan.