Second hand car purchase has been gaining favour in the post-pandemic market scenario. One of the key reasons for this increase in demand for these cars can be that while the income levels of many people have taken a hit, their lifestyle aspirations continue to hold up. Rightly so, as second hand cars today offer great value for money, allowing the owner to derive decent driving value over a long duration. To further support this purchase aspirations, financial institutions have simplified the availability of loans on second hand cars. These loans are conveniently available and the approval comes by quickly, leading to fast borrowing.
There are, however, several aspects related to a used car loan that you must know before making your borrowing decision and deciding on the loan to avail. Let’s check out some important ones below.
Financing Governed Under the LTV-Based Lending Arrangement
As a loan on second hand cars is a secured funding option, the financing arrangement follows the LTV or Loan to Value based arrangement. It means that the loan amount is available only up to a certain percentage of the current market value of the vehicle. As per this norm, you need to meet the remaining cost via self-financing through down payment. Today, given that second hand cars are available in next to new conditions for purchase, financing availed on such vehicles can go as high as 95%, thus enabling you raise maximum funding for vehicle purchase
High Funding Value
Along with this funding cap, used car loans also come with a high financing limit. Meaning, the total loan amount available is suitably high, enabling you to choose second hand car model of your liking without any inhibitions regarding the loan availability. With reputed lending institutions in the market, you can easily avail financing of up to Rs.50 Lakh as a loan on second hand cars given that you fulfil the eligibility requirements of the lender.
Financing at Low Rate of Interest Possible
Against the general notion that used car loans are costly, you can easily avail the financing at low rate of interest. Given that the second hand car loan interest rates are primarily a reflection of the risk undertaken by the lender and that associated with the borrower’s profile, a reduction of such risks can bring about interest rate affordability with ease. You can make changes to factors like your credit history, your existing liabilities, credit utilisation ratio, and such for loan approval at low rates.
Car Condition Crucial to the Availability of the Loan
While used car loans are easily available today, their approval critically depends on the condition of the vehicle you have selected. For instance, lenders prefer financing for vehicles that are not more than 2 years old as they carry low depreciation. Similarly, a used car should not have more than 2 previous owners for easy availability of the loan as it increases the overall risk associated with the vehicle.
Car History May Impact Loan Availability
Along with the car’s condition, its history of use must be checked as well. For instance, the vehicle must not have too many insurance claims on it. It should not have undergone several repairs and replacements as well and should have been thoroughly covered under a suitable insurance plan.
Once you have kept these aspects in mind and have arranged the necessary documents thoroughly, you can proceed to apply for your loan on second hand car. As financing is available for all types of vehicle makes and models, you may easily find the right car model to take home with the necessary used car loan approval.