The dream: Your very own car. The budget: Not nearly enough for the new hatchback of your dreams.
The decision to buy a used hand car was after a lot of thought and research; mostly because you cannot afford a new car with your current measly salary package. You have asked all your ‘car expert’ friends, talked to used car dealers, test driven a few cars and finally narrowed down to the perfect model and make. Now all you need is that coveted used car loan.
Many reputed banks like HDFC Bank, ICICI Bank, Tata Capital, Magma Fincorp and Fullerton Credit have great offers for used car loans. Nevertheless, it is true that ‘used car loans’ are slightly more difficult to obtain than a loan for a new car. As a thumb rule, you may get about 75% of the value of the car as loan. However, the loan on average may cost 3% more than for a new car.
Once you approach your bank for the loan, you will find that they will send in a valuation expert to calculate the value of the car that you have picked. Their valuation will depend on various factors including the condition of the car, the kilometers run and the model of the car. If the car is very old, it will be that much more difficult to finance. A phased-out car is nearly impossible to finance. Depending on this valuation, the bank will decide how much they will lend you.
The age of the car and the tenure of the loan combined together should not generally exceed seven years. For example, if the car you are considering is three years old, you can get a loan for four years. If the car is five years old, the loan you get will only be for two years. It would be nearly impossible to find a financier willing to give you a loan for a car older than 4-5 years.
Lenders will look at your financial history while considering your loan. Banks can get a thorough look at your financial strength by analyzing your CIBIL score. CIBIL score reflects all your financial activities, like how regular you have been at paying your credit card bills on time for example. Lenders will view your low utilization score as an indication of you being a disciplined spender, and thus a less risky candidate.
The loan you receive depends on your relationship with the bank as well. Some banks have tie-ups with certain dealers. This makes your case more dependable and thus they will be more willing to lend. They could even finance 80-90% of the value of the car if you have a strong case. Before agreeing to a bank’s amount, make sure you consider all options. Use sites like bankbazaar to compare and find the right loan for you.
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