Know The Car Loan Process for Used Car in India – A Step By Step Guide

The used car market in India is expanding—in FY 2021-22, 4.4 million used cars were sold in India, a 15% increase from the previous year when 3.8 million cars were sold. And by FY 2026, this number is expected to reach 7.65 million units. 

One of the most crucial steps in the used car buying market is procuring a car loan. This blog will take you through the car loan process step by step, helping you secure the financing you need for your used car purchase in India. 

Whether you're a first-time buyer excited to hit the road, or someone looking to upgrade to a bigger, better ride, rest assured, we've got you covered. From understanding old car finance to navigating the ins and outs of securing used car financing, we'll explore the mysteries and equip you with the knowledge you need to confidently get a used car loan. So, let's get started and help fast-track you on your journey toward car ownership!

What's the Plan? 

Before we look into the detailed steps of the car loan process, let's lay the groundwork for your journey. We'll start by helping you assess your financial readiness, ensuring you're on a solid foundation. Once we've got that out of the way, we'll dive into the exciting world of loan options. 

It's all about finding the perfect fit for your budget and goals. So, whether you're eyeing that sleek sedan or a reliable hatchback, we're here to guide you every step of the way. Let's get started! 

Assessing Your Financial Readiness

When it comes to looking for and choosing the ideal car loan, it's crucial to start with a solid understanding of your financial standing. Remember, a thorough evaluation of your financial readiness helps you approach the car loan process with confidence, ensuring that you make decisions aligned with your financial health.

Here's a step-by-step breakdown to help you navigate this process effectively:

1. Monthly Income

• Begin by calculating your monthly income from all sources
• This includes your salary, any rental income, freelance earnings, or other sources of regular income

2. Expenses

• Next, list down all your monthly expenses
• This includes rent, utility bills, groceries, entertainment, and any other regular outflows

3. Existing Financial Commitments

• If you have ongoing financial commitments like personal loans, credit card bills, or existing EMIs (Equated Monthly Instalments), make sure to account for them

4. Affordability

• With a clear picture of your income and expenses, it's time to determine how much you can comfortably allocate towards a car loan repayment each month
• Remember, your car loan should fit into your budget without causing financial strain

5. Additional Costs

• Alongside the loan repayment, consider other car-related costs
• These include insurance, fuel, regular maintenance, and occasional repairs

6. Loan Amount

• Based on your financial assessment, you'll be able to determine a suitable loan amount
• This ensures that you're not overextending yourself financially and can comfortably manage your car loan payments along with other financial commitments

Also Read: How To Transfer a Car Loan to Another Person?

Researching Your Loan Options

With a firm grasp of your financial situation, it's time to look into loan options. By meticulously researching your loan options, you're not only finding the best financial fit but also setting the stage for a smoother and more confident car loan application process.

Here's how to navigate this critical phase:

1. Lender Variety

• There are several lenders out there, make sure you do your research before choosing one 
• Consider approaching traditional banks, cooperative credit unions, and modern online lenders

2. Terms and Interest Rates

• Different lenders offer different terms and interest rates, make sure that you run the permutations and combinations and see if they align with your requirements
• This step requires meticulous research to comprehend the fine print of each option

3. Homework Pays Off

• Dedicate time to comparing interest rates and loan tenures
• This diligence can save you substantial money in the long run

4. Unveiling Hidden Costs

• Beyond the obvious, be aware of any concealed charges or fees that might accompany the loan
• Scrutinise the documents and ask the questions to make sure that you've covered all bases

5. Trust and Reliability

• Opt for established lenders with a reputation for transparency and reliability
• Online reviews and word-of-mouth recommendations can provide valuable insights

6. Tailoring to Your Needs

• The ultimate aim is to secure a loan that aligns with your budget and requirements
• Customisation is key to a successful car loan journey

Also Read: How To Get Used Car Loan For Bad Credit Score?

Steps to Get a Used Car in India: The Entire Process

Now that you're well-versed in your loan options, let's rev up the engine and look into the steps you'll need to take to bring your dream used car home:

Step 1. Selecting the Car

• The first step is choosing the used car that you wish to buy
• Keep your budget in mind and look for options that align with it

Step 2. Research

• Once you've narrowed down your options, research the market value of the chosen car model
• This will give you an idea of whether the price being asked is fair

Step 3. Online Platforms, Dealers, or Private Sellers

• Decide whether you want to buy from an online platform like CARS24, a dealer or a private seller
• CARS24 offers certified pre-owned cars with easy financing options and a 7-day, no questions asked return window
• Dealers and private sellers might ask for a much higher price, often with non-negotiable terms 

Step 4. Test Drive

• Always take the car for multiple test drives 
• This will help you assess its condition, handling, and comfort

Step 5. Vehicle Inspection

• If possible, get a professional mechanic to inspect the car for any hidden issues
• This step is crucial to avoid future troubles

Step 6. Negotiation

• Don't hesitate to negotiate the price with the seller
• You might be able to get a better deal than the initial asking price

Step 7. Documentation

• Once you've agreed on a price, gather all the necessary documents from the seller, including the vehicle's registration and transfer forms

Step 8. Loan Application

• With the car's details in hand, it's time to apply for the used car loan
• Prepare the required documents, including proof of identity, address, income, and employment

Step 9. Loan Approval

• After submitting your application, the lender will review your documents and assess your eligibility
• If everything checks out, they'll provide you with a loan approval

Step 10. Down Payment

• Pay the down payment for the car from your funds
• The loan will cover the remaining amount

Step 11. Loan Disbursement

• Once the lender has verified all necessary documents, they will disburse the loan amount to the seller

Step 12. Registration and Insurance

• Register the car in your name and get insurance coverage before hitting the road

Step 11. EMIs Begin

• Your equated monthly instalments (EMIs) will start according to the loan terms
• Make sure to make timely payments

Also Read: New Car Loan Vs Used Car Loan

The Bottom Line

Congratulations! You're one step closer to becoming the proud owner of a pre-owned car, all thanks to the car loan process. Your commitment to planning, research, and financial responsibility has been the driving force. By diligently following these steps, you're now prepared to confidently navigate the roads in your vehicle. 

Remember, this journey requires careful planning, research, and commitment to your financial responsibilities before you plan for newer, bigger adventures. And there you have it, a comprehensive guide to navigating the car loan process for buying a used car in India. We hope this guide has shed light on the journey and made it seem less daunting.

FAQs

Q. How can I qualify for a used car loan?

To qualify for a used car loan, lenders typically consider your credit score, income, employment stability, and other financial factors. A steady income and good credit history increase your chances of approval.

Q. Can I secure a used car loan with bad credit?

Yes, you can, although it might be more challenging. Lenders may offer loans at higher interest rates for individuals with bad credit.

Q. What's the difference between secured and unsecured car loans?

Secured car loans require collateral (like the car itself), which can be seized if you fail to repay. Unsecured car loans don't require collateral but might have higher interest rates.

Q. How long does the used car loan approval process take?

The approval process can vary but usually takes a few days to a week, depending on the lender's verification process and your application's completeness.