5 Steps to Get Loan Financing for a Used Car
The soaring inflation in the current times has pushed more and more people towards purchasing a used car. The advancing technology has allowed for swift manufacturing, greater accessibility, and ease of purchase for potential second-hand car buyers among others.
Moreover, if you are a first-time buyer, it is recommended that you hand-pick the best options- both, the car model and the loan required for financing it. Got no idea about used car loan financing? Worry not!
Grab a cup of coffee and read on.
Benefits of a Second-hand Car Loan
Going for a pre-owned car means you won’t be burning a hole in your pocket. Additionally, with the issuing of car certificates in practice, you can conveniently get a purchase warranty. Similar to the multiple benefits of buying a second-hand car, financing a second-hand car loan also comes with some perks:
- High loan amount
- Loan payment tenor stretches up to 60 months conveniently
- Fast-track loan approval facility
- Hassle-free procedure
- No collateral involved
- Requires a few documents to process the application
- Zero to a negligible waiting period for car delivery
While most loan providers offer these common benefits, some may give additional benefits as a goodwill gesture.
How to Get Easy Loan Financing on Second-hand Cars
The mere thought of applying for pre-owned car loans sends shivers down a borrower’s spine. Not anymore! With huge improvements in technology, the demand for second-hand car loans has increased drastically. The finance penetration of the second-hand car market is projected to increase by 35 percent in 2025. So, here are 5 steps to avail of smoothly used car loans:
- Step 1: Check the Eligibility Criteria
To ensure hassle-free and instant loan financing, you must double-check the eligibility criteria in the first place. Any salaried individual or businessman between 21 to 65 years of age can apply for the loan.
He/she should necessarily have been employed for more than one year with a stable income. Moreover, a good credit score may be a significant factor in loan processing.
- Step 2: Research Different Loan Providers
Choosing an authorized lender is not a piece of cake. You will have to hop on and off at different websites of the loan providers to land a decision. Ideally, you should choose a lender with a good history- a paperless application journey, attractive deals, and procedure transparency.
Furthermore, having a lender with associates from an automobile company can add to making your used car loan financing journey untroubled. So, we advise that you take time and have your research.
- Step 3: Choose the Best Interest Rate
Once you have narrowed down the lender, it’s time to compare the interest rates. While the chances are that your desired lender must be offering you with best interest rates but it’s always important to double-check your research.
If not, then your negotiation skills would help you land the best deals. Usually, the interest rates are higher in the case of used car loans due to depreciated value of the car. Therefore, compare the interest rates and make your decision wisely.
- Step 4: Zero in on the Best LTV Ratio
The loan to Value (LTV) ratio is the amount you borrow as the proportion of the value of purchase. Most of the time, due to higher interest in second-hand cars, the LTV ratio is low. To put it, you won’t be getting the loan amount the same as that of the purchase amount of the car.
Although the LTV ratio differs with lenders, it ranges between 50-80 percent. Suppose your car costs Rs 1 lakh and the lender is offering you a loan amount of Rs 50,000, then the LTV ratio is 50 percent. But, there’s one thing that makes LTV a little less worrying.
Agreeing to a low LTV ratio, you can negotiate your way to receive a longer repayment tenure. How you get away with a lower LTV is your clever call!
- Step 5: Keep Your Application Documents Ready
The last step would be to organize the required documents in one place so that once you begin with the application (whether online or offline), you should not be the reason behind the late processing of the second-hand car loan. Double-check the list of the required documents and be ready!
Getting a car is the manifestation of your dream and so you shouldn’t compromise on anything that brings you closer to it. The same goes when you are looking for used car loan financing. The key to landing a good deal is to have your research, stay updated with the current market rates, and make your move wisely.