Gone are the days when having a car was a luxury. A car has become an essential commodity these days to travel easily in the comfort of your private space. Moreover owing a four-wheeler, big or small is perceived as a status symbol and a must-have in Indian households especially if you are a family of more than three. But given the recent scenario of economic recession due to the pandemic, just the monthly expenses would have eaten into the savings, lessening any immediate chances of buying a brand new car. An economical alternative for a situation like this is to buy good quality second hand cars and you can even take a loan to buy second hand car.
What is a second hand car
A second hand car or preowned car is essentially a car that has already been used by one or more owners but is in good condition to be used and bought at a cheaper rate than the original car price. According to a CRISIL report around 4.2 million Indians are driving the used cars demand in the country and the used car sales shot up 115% during the lockdown. Used cars can be bought from independent dealers by taking a vehicle loan or specifically a used car loan.
Things to consider before taking a used car loan
The car finance market is one of the largest in India and especially the used car finance market is expected to reach 10 billion dollars of annual lending by 2021. It is easy to get a loan to buy second hand car as several banks and NBFCs provide credit specifically for it. So if you are planning to buy good quality second hand cars then you must assess a few things before taking a used car loan.
Allocation of Budget
Even a 30 lakh BMW car can be bought for one-third of its selling price when bought second hand. Very alluring isn’t it? You can get easily carried away by the lucrative concept of owning big cars for a reduced price but it is important to set a budget and then look for cars that fit your requirements. You should be able to afford that loan to buy second hand car while managing your monthly expenses, children's school fees and other EMIs.
Loan amount sanctioned
The loan amount is sanctioned only after a loan officer from the lending company inspects the condition of the used car to be bought by the applicant. The parameters are arbitrary and vary from lender to lender. Most of the time the loan amount is granted only for 70-80% of the car value and you have to pay the rest out of your own pocket to pay. Most lenders avoid giving loans only for cars that are more than 5 years old as cars older than that will cost more for maintenance and service.
The documentation for getting a loan to buy second hand car is usually complicated and tedious to maneuver through as lenders are wary of approving loans until the car registration title is transferred to the applicant’s name. Loans can get disapproved if the dealer you are buying the car from does not produce reliable documents like a registration certificate under his/her name or valid insurance.
Interest and loan tenure
Average interest rates on used car loans range from a minimum of 14% to 20% varying across different lenders. They are usually on the higher side compared to new car loans which range from 8-10% on average. The higher interest rate is mostly due to the depreciating value of pre-owned cars. The loan tenure too is pretty rigid and is only a maximum of 5 years to repay the loan.
Alternative finance options for used cars
To avoid bumping through such hurdles in availing a loan to buy second hand car you can opt for a personal loan and use it to buy a preowned car. Personal loan tenures are longer and have minimal user end restriction which means you can avail the entire car rate as loan amount and pay it without spending from your own pocket. However, the catch is that credit score is scrutinized for granting personal loans as it is unsecured. So the chances of availing a personal loan with low CIBIL score is very less.
The best option to collectively address all these obstacles is availing a gold loan. A gold loan is a secured loan given against gold pledged and requires very little documentation and credit score. You can use a gold loan to buy commercial vehicles in second hand too while most vehicle loans do not admit that. While there are many players in the gold loan market it is important to pick the lender who suits your used car purchase needs.
Rupeek is one of the most successful online gold lenders. There is no user-end restriction to our loans and hence you can use the amount for any of your personal needs including a used car purchase. You can use the gold ornaments kept away in your home lockers for used car finance
- Low interest rates starting at just 0.79% per month.
- No exhaustive documentation needed.
- High per gram gold rate offered ensures that you get maximum value for the gold pledged.
- Simple and quick online application process.
- Cash disbursal in just 30 minutes. You need not wait for a week to get your used car loan approved.
You can also avail a gold loan overdraft from Rupeek where we give a line of credit against the gold pledged and you can withdraw any amount whenever you want. It works similar to a credit card and you can pay interest only for the amount withdrawn. Using these simple yet effective funding options from Rupeek you can buy a used car in an easy and tension-free manner.