A lot of information about loans for new cars is easily available over the Internet. However, there are few sites providing accurate information on second hand car loans and adequate details are also not available. The following article tried to throw some light on the general rules for used vehicle loans, but in no particular order.
1) It is always better to apply for a bigger bank rather than considering offerings from small lenders. This helps get a better idea of the competition.
2) Interest rates on loans for used cars are higher than those for new cars. The interest rates are calculated on the basis of age of the vehicle, model and customer profile. Loans cannot be availed for cars more than 4-5 years old. If a new car is financed at 11-14%, a used car would cost 14-16%.
3) At best, 75% of the vehicle’s value can be financed by the loan company. This is lesser than the amount that can be availed to purchase a new car.
4) HDFC provides specific loans for pre-owned vehicles that are available for an amount that is 3-6 times the payer’s income. Other known companies are ICICI, Axis Bank and SBI. State Bank Loans are preferred by many due to offer transparency and flexibility for payment up to 7 years. It also allows payments anytime in the month, along with low processing fees and additional accident insurance, which could help reduce the total loan.
5) No guarantor is generally required for a used car loan, unlike the one for a new car. However, a guarantor maybe required if the creditor’s credit history is bad.
In order to get the best car loan for used vehicle, it is important to not only compare providers, but also be aware other factors such as credit history that would also affect approval. Though most models of cars are financed, it cannot be said that all can be financed.