Can We Buy Used Cars on Loan? - All About Buying & Selling of Used Cars, New Car Launches
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Can We Buy Used Cars on Loan?

Team CARS24
editor

In India, the used car market is much larger than the new car market. It is said that the demand for second hand car loan has, in fact, increased since the end of the pandemic.

Much of this is due to these vehicles being more affordable. It is not considered a good idea to purchase them through cash payment. Instead, the best idea is to go for a 2nd hand car loan.

Most banks in our country offer pre-owned car loans, starting from just Rs 1 lakh and up to 85 percent of the value of the vehicle. Even the loan application process is quite easy at most banks. Here’s all you need to know to be able to buy second-hand cars on finance.

What Is a Pre-Owned Car Loan?

As mentioned, most banks today offer car loan for second hand car which empowers an individual to purchase a used vehicle through finance. However, it must be understood that buying used cars on loan is a completely different affair than buying a new one through finance.

Having said that, options for second hand vehicle finance are totally different from those for new ones. Even the benefits and features of these loans are completely different.

How Much Loan Can I Get on a Pre-Owned Car?

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While most banks offer a minimum second hand car loan of Rs 1 lakh, a few offer an upper limit of as much as Rs 2.5 crore. In most cases, a car loan for second hand car is up to 6 times of the annual income of an individual.

The buyer can also avail as much as 100 percent of the value of the car. However, a catch here is that the age of the vehicle at the time of the maturity of the loan should not exceed 10 years. Also, the maximum loan tenure for a used car is 5 years.

What Are the Advantages of a 2nd Hand Car Loan?

There are several benefits of buying used cars on loan. These include –

  • Convenient loan tenure of up to 5 years
  • Instant and easy approval of loan
  • Loan amount is disbursed within 24 hours of approval
  • Maximum loan amount of up to Rs 2.5 crore
  • Less documentation required
  • Collateral not required

Can a Used Car Be Financed?

Yes, a second-hand or a used car can be financed pretty easily. The borrower can even opt for a personal loan for buying a used car. Such loans are often available at attractive rates and do not require much documentation either. Plus, the borrower benefits from features such as flexible repayment plans, easy eligibility criteria and more.

What Are the Documents Required to Get a Loan for a Used Car?

Basically, there are three general documents required for second hand vehicle finance. However, the exact requirement differs on the basis of the borrower’s occupation.

Here are the details:
General Documents –

  • Application Form
  • Registration Certificate of Vehicle.
  • KYC Documents

Documents required:

Type of BorrowerDocuments Required
Salaried IndividualsAny of the below ID & Address proof:- Valid Passport / Permanent Driving license [recent, legible, laminate] / Voters ID Card / Job card issued by NREGA / Letter issued by the National Population Register containing details of name & address

All the below documents as income proof:- Latest Salary Slip / Latest Form 16 / Latest ITR

Any of the following as sign verification proof:- Passport Copy / Photo Driving License with Date of Birth / Credit Card Statement with Credit Card Copy / Banker’s Verification / Copy of Margin Money Paid to the Bank
Self-Employed Individuals (Sole Proprietorship)Any of the below documents as ID & Address Proof:- Valid Passport / Permanent Driving license [recent, legible, laminate] / Voters ID Card / Job card issued by NREGA / Letter issued by the National Population Register containing details of name & address

Any of the below as proof of sign verification:- Passport Copy / Photo Driving License with DOB (recent, legible, laminated) / Credit Card Statement with Credit Card Copy / Banker’s Verification / Copy of Margin Money Paid to the Bank
Self Employed Individuals (Partnership Firms)Partnership deed as age proof / Partnership deed as identity proof / Latest ITR/Previous ITR with Adv. Tax paid Challan / Latest IT assessment order as proof of income. Audited balance sheet in case the business turnover exceeds Rs. 40 Lakh, or the professional turnover exceeds Rs. 10 Lakh

Any of the following documents as proof of address:- Partnership Deed / Telephone Bill / Electricity Bill

Any of the following as sign verification proof:- Passport Copy / Photo Driving License with DOB (recent, legible, laminated) / Credit Card Statement with Credit Card Copy / Banker’s Verification / Copy of Margin Money Paid to the Bank
Self Employed Individuals (Private Limited Companies)Memorandum and Articles of Association / Certificate of Incorporation as age proof / Memorandum and Articles of Association / Certificate of Incorporation as identity proof / Latest ITR and audited balance sheet along with profit & loss account as proof of income

Any of the following documents as address proof:- Memorandum and Articles of Association / Certification of Incorporation / Telephone Bill / Electricity Bill

Any of the following as sign verification proof:- Passport Copy / Photo Driving License with DOB (recent, legible, laminated) / Credit Card Statement with Credit Card Copy / Banker’s Verification / Copy of Margin Money Paid to the Bank
Self Employed Individuals (Public Limited Companies)Memorandum and Articles of Association / Certificate of Incorporation as age proof / Memorandum and Articles of Association / Certificate of Incorporation as identity proof / Latest ITR and audited balance sheet along with profit & loss account as proof of income

Any of the following documents as address proof:- Memorandum and Articles of Association / Certification of Incorporation / Telephone Bill / Electricity Bill

Any of the following as sign verification proof:- Passport Copy / Photo Driving License with DOB (recent, legible, laminated) / Credit Card Statement with Credit Card Copy / Banker’s Verification / Copy of Margin Money Paid to the Bank

Is It Good to Take out a Loan for Buying a Second Hand Car?

Interest rates on second hand car loans are higher than loans for new cars. Also, there are some banks that do not offer loans on cars that are older than 3 years or more.

Also, the used car loan doesn’t cover the insurance cost. However, one can still purchase a used car on loan as it won’t have any impact on the savings.

What Is the Easiest Way to Get a Second Hand Car Loan?

Most banks will offer used car loan pretty easily if the buyer meets the below conditions –

  • A good credit score
  • Have a good source of income
  • Valid identity and address proofs
  • Offering a higher down payment

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