8 Things to Keep in Mind While Opting for a Pre-Used Car Loan
It can be exciting to shop for a car. And if you're looking to purchase a used car, you need to get the financing done the right way. Buying a certified preowned car vehicle may come with specific issues that you need to be aware of and iron out. Although it may appear similar to purchasing a new car, there are key differences when going in for a pre-used car loan. Let's look at the top eight steps you need to take when getting a used car loan.
1. Look into Your Credit Score
Before you are approved for a used car loan, lenders typically look into your credit history. Your credit score, which is a snapshot of your credit history, will help potential lenders determine the loan amount and interest. A vital component of a lender’s decision to lend you the money is your debt-to-income ratio. And hence, you may want to ensure that your credit score is high.
2. Identify the Car of Your Choice
Look into the type of car you wish to purchase and its availability. Understand whether the vehicle fits into your budget. You may want to visit the dealership to go in for a test drive and confirm if it is the best fit for you.
3. Research Car Financing Lenders
When looking for a used car, it can be a good idea to compare and research used car loan rates from multiple lenders. It can ensure you're getting a competitive rate and a fair offer.
4. Understand the Valuation of the Car
When valuing the car, several parameters are taken into account. These include kilometers driven, user profile — personal or commercial use, vehicle modifications, car title, place of usage, and others. Ensure you get a fair valuation of the car you wish to purchase.
5. Know the Loan Amount
Some financial institutions may offer you the total auto price on loan or 100% of the car's on-road price. Some others may provide you with 90% of the on-the-road price for a new car loan. Look into your eligibility criteria to get the best financing option for your used car loan.
6. Check the Rate of Interest
Your used car loan rate of interest may depend on the type of vehicle, your credit history, your income and other factors. Typically, interest rates and used car loans are higher than for new car loans. You may want to compare interest rates and processing fees when selecting a used car loan from the right lender.
7. Find Out the Loan Tenure
Generally, loan tenures on used car loans vary between 3 to 5 years. Another factor that can affect the loan tenure is the age of the used vehicle as well. Here, you may also want to understand the repayment structure and penalties, if any, especially on closing the loan before the tenure ends.
8. Keep All Documentation in Order
Before you go ahead with your chosen lender on the used car deal, check and complete the following:
Registration Certificate [RC]:It contains crucial vehicle information such as date and place of registration, chassis number, owner serial, hands transfer, engine number and other details. Ensure that the certificate is transferred to your name.
Auto Insurance:You can either opt to transfer the insurance policy from the previous owner or choose a new insurance policy for your used car. Make sure that all the paperwork is in order before you proceed.
No Objection Certificate [NOC]:This is a mandatory certificate that reveals whether the vehicle has been purchased on loan by the previous owner or registered in another state. You will need to approach the Regional Transport Office [RTO] to issue the re-registration of the car in your name.
Pollution Under Control Certificate [POC]:This document certifies whether the used car vehicle submissions within the prescribed limits as stated by the Central Motor Vehicles Act, 1989.
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When comparing used car loans, look into the following factors to get the best loan rate and tenure.
Make a larger down payment.Doing so may mean borrowing less and paying less interest over the loan tenure.
Find out the monthly payment.This is the used car loan EMI amount that you agree to pay the lender every month until the car loan is paid off. This payment includes both the principal and interest amount and is the same every month over the car loan life.
Check the APR.The Annual Percentage Rate [APR] of a used car loan includes the interest rate, processing fees, and other loan fees charged by the lender. Comparing APRs can be a good way of knowing the relative cost of different used car loans.
With a bit of persistence and research, you will be able to find a car of your choice and save a good deal of money. Remember to do some comparison shopping for the best deal before selecting the vehicle of your choice. Also, it is essential to read the fine print and make sure you understand the used car warranty's exclusions and inclusions before you sign on the dotted line.
Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. Please note, loans related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.