Loans: Buying a used car? Tips for getting a loan
Hasty decisions can lead to financial problems. When buying a car, people tend to stretch their budget to impress those around them. Buying your car is one of the most exciting things in your life, but if you are facing a shortage of funds, you can always opt for a used car. Due to its lower initial cost, a used car is a popular option for many first-time buyers. Getting a loan to buy a used car is also easy because almost all banks and other financial institutions offer loans to buy such vehicles.
Who can apply?
Buying a new car can be expensive, especially if it’s your first car. It may require additional funds for maintenance and a higher insurance premium. However, you can get a used car at a very attractive price. Also, the insurance premium is cheaper due to the depreciation in value of the car over time. A used car loan can help you own a car without putting too much strain on your finances. The minimum and maximum age of the borrower must be around 21 and 65, respectively, to obtain a loan.
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Adhil Shetty, CEO of Bankbazaar.com, says, “In most used car loans, the maximum repayment term is between one and five years, but in some cases banks may allow repayment terms of up to seven years. Lenders also check the repayment capacity of the borrower like annual and monthly income, credit score, loan to value ratio (LTV), etc. So, depending on your financial profile, your credit rating and your ability to repay, you can get a loan to buy a used car. »
Other financing options
In addition to self-financing or taking out a loan for the purchase of an old vehicle, you also have other financing options. You can take out a secured or unsecured loan. If you’re willing to pay higher interest and fees and don’t want to give the bank collateral, you can opt for a personal loan to buy a used car. On the other hand, if you want a secured loan, you
can use assets like gold, securities like KVP, LIP, NSC, FD, etc. or mortgage your property to obtain a secured loan for the purchase of a used car.
Interest on a used car loan is comparatively cheaper than personal loan and loan against securities for selected entities. These don’t require you to mortgage the car papers to the bank so they can save you money for mortgage fees.
Advice for borrowers
The loan to value (LTV) offered by the bank is an important factor that you should consider when applying for a car loan for the purchase of a used vehicle. The LTV generally varies from lender to lender and is between 50% and 90% of the used car’s assessed value. If you buy the vehicle from a bank’s used car dealers, you can get a loan at a better LTV ratio and a lower interest rate. Also, do not forget to physically check the condition of the used car as well as its history through its maintenance books with the authorized dealer.
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A used car can be a good value if you have done all of your due diligence on the car and the loan you are taking out to purchase the vehicle.
— Depending on your financial profile, your credit rating and your ability to repay, you can obtain a loan to buy a used car;
— The maximum repayment term is between one and five years, although some banks may allow seven years;
— If you are ready to pay higher interest and fees and do not want to give the bank a guarantee, you can opt for a personal loan;
— The loan to value is generally 50% to 90% of the assessed value of the used vehicle