There are several perks of buying used cars and a lot of people prefer this option for a variety of reasons. Buying used cars is a good option for many people who have a specific objective in mind. That being said, almost all of us have heard and know about car loans. While the term is most commonly used for loans that are offered to buyers of new cars, in today’s time, there are options to finance the purchase of used cars as well. All across the country, numerous lenders including major banks and finance companies offer loan for used car purchase.
People buy used cars for a number of reasons. Amongst them, one of the key reasons is a lower sticker price of the model they prefer. While budget constrictions and affordability are key factors for buying used cars, there are also other reasons like gaining driving experience with such a pre-owned vehicle, etc.
When it comes to buying a used car, finding a reliable certified pre-owned model can help you get the car you want while also saving a decent amount of money. Although, even when you buy a used car, you may still need a loan to pay for the vehicle, based on its price and the kind of cash you have present.
In today’s time, there are numerous options available when it comes to used car loans. There are numerous lenders who offer such financing options including banks, credit unions, auto dealerships as well as online lenders. When you are trying to figure out which is the best loan for you, you must be able to understand the different options available to you and what they actually offer.
Let us take a brief look at the different sources from where you can avail used car loans.
Banks and Credit Unions
These two are the most common lenders who offer financing options both for new as well as used cars. When buying a used car, you can get a loan preapproved from a bank or credit union. This will help you to make the purchase faster and hassle-free.
A lot of used car dealerships also offer loan for used cars. There are different kinds of arrangements for such financing and they are:
- Dealer-arranged financing
- Captive financing
- Buy Here Pay Here (BHPH) financing
There are a lot of online lenders and finance companies who offer loans to buy used cars on the digital platform. They work in a similar way like banks and credit unions and will offer these loans at a similar or slightly higher interest rate.
There are a lot of options available in the market when it comes to used car loans. With so many options available, you will naturally need to research and compare the best options based on certain factors. This will help you choose the best lender and avail the best loan option out there. Here is a list of the most important things that you need to consider.
Down Payment: The greater the down payment, the lesser will be the overall cost of the car. This is because you will have to pay the lesser interest due to the fact that the principal amount borrowed is lower.
APR: Comparing the annual percentage rate (APR) of different lenders is a must. Based on the fact that other variables like down payment and loan terms are equal, comparing APRs will help you assess the relative costs of different loans.
Loan Term: The repayment period is also a key consideration. It can be anywhere between 36 to 84 months and you need to choose a lender that offers the option that’s suitable for you.
Monthly Payment: Also, the EMI you will be ultimately paying on a monthly basis has to be taken into account and must be a suitable amount based on your income and overall expenses.
The basic eligibility criteria for a used car loan includes:
- The person’s age has to be between 21 and 65 years.
- The person must be a resident of India.
- A decent credit history.
The basic documents you will need during the application process are:
- ID proof
- Address Proof
- PAN card
- Aadhar card
- Employment details
- Income proof
- Homeownership or rental status
- Monthly income and proof of the same
- Bank statement for last 3 months
- Details of the car you are buying (optional)
You can visit a lender’s office like a bank branch or even apply for such loans online. You can also apply and get your loan pre-approved online. Loans for used cars can also be availed directly at the auto dealership from where you buy the car! There’s no shortage of options and you need to make a wise and informed choice before you make the purchase!