A Complete Guide to Help You Finance Used Car Purchase
Posted on 4 May, 2021 by Hero FinCorp
The demand for owned cars as the preferred mode of commute has been growing in the present Indian market for various reasons. Some primary ones include a growing disposable income, workplace-home commute distances and willingness for freedom of transportation. Under this product segment, the demand for used cars has witnessed typical increase, partly due to the easy availability of these vehicles at reasonable prices and partly because it has become typically convenient to finance used car today than it was earlier.
As the used car market is getting more and more organised, financing the purchase of a second-hand car has only become simpler. Nevertheless, purchasing a used car also comes with its set of risks actual valuation, condition of the car, etc., which can also affect the financing of these vehicles. Here’s thus a detailed guide to help you finance the purchase of your used car without much hassle.
Factors to Consider for Used Car Selection
Used car financing must be preceded by the following considerations that would not only help one secure fund easily but also ensure minimum vehicle ownership and maintenance hassles.
1. Type of car
It is always advisable to look out for popular car models when seeking to finance used car purchase from a lending institution. It is primarily because lenders prefer to provide funding for models whose market values are easily identifiable. Further, it is also preferable to go for the latest and most popular models to ensure a high resale value.
2. Previous ownership
The number of previous owners a used car had helps determine its depreciation value. For financiers funding such car purchase, the preference more often than not lies with single previous ownership-based second-hand cars.
3. Age of the car
It is another crucial factor playing a critical role in the availability of a used car loan. While it is possible to finance cars that have been purchased years back, financial institutions usually prefer to finance vehicles that are not more than 3 years old.
Tips to Finance Used Car Purchase
Check out the following tips that should help with suitable lender as well as used car loan selection for affordable and maximised financing.
a. Look for the lowest rate of interest: While interest rates on used car loans are usually higher than those for new car loans, you can still compare lenders to arrive at the lowest available option.
b. Check tenure flexibility: You should also consider the tenure flexibility available and decide on EMIs payable accordingly. Note that a lower EMI selection results in longer tenure but also higher interest payments and vice versa.
c. Seek a high LTV: Loan to value ratio or LTV is the maximum percentage of the used car’s resale value available as funding, wherein it is always advisable to seek a high LTV for maximum financing.
d. Meet eligibility and document requirements: Once you have decided on the lender based on the loan features, make sure to check out and meet all eligibility requirements. Also, arrange for all required documents to hand over during loan application submission for seamless processing.
Individuals must know that to finance used car purchase, they also need to hypothecate the vehicle, which shall be removed only after repayment of the loan in full. Support your loan application with high income, credit score, and other eligibility fulfilments to secure the best features on your used car loan.
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