Used Car Finance (Loan)- Does It make sense to go for a used car loan

Getting upfront used car loans have become a lot easier these days with the advent of multiple players in the used car (loan) market including various NBFCs and third party aggregators.

In this article we will see and learn

• Calculating your loan eligibility
• What are the documents generally required to get the loan processed
• Does it make sense to go for costly used car loans when buying a used car?
• What are the Pros and Cons of going for a used car loan vis-à-vis new car loan?
• What are the different types of used car loans available in the market?
• What are the most important parameters one should keep in mind while signing on the dotted lines?

Calculating My Loan Eligibility

While it makes sense to define a budget range at the start of research itself, knowing your eligibility in terms of loan amount possible on the particular vehicles and for how many months also is important.

In order to understand your own eligibility it would be prudent to know and understand what an ideal ‘profile’ for the said finance is.

Now this could vary from bank to bank but generally speaking, a basic minimum fundable profile is someone

• Who is more than 21 years of age.
• Is in a regular gainful employment (salaried/ self employed) for at least 2 years (it could be in different companies too).
• Has a monthly income of above INR 25000 per month reflecting in bank account.
• Has a resi stability of at least 2 years (rental/ owned) at the same address or at least in the same city.
• Has a clean CIBIL record (i.e. no previous defaults reported in his/her name)
• Have preferably no bounces in account in the last 6 months.

Any deviation from the above profiling should be scored as -1 and any parameter scoring higher than the above profiling could be scored as +1. An overall score of +5 should be considered Ideal and easily fundable.

Following addition and subtraction in scoring can help understand your individual credentials as every person is unique in terms of their paper footprints

When it comes to defining the loan amount as per your credentials, following rule of thumb can be of great use.

30% of you monthly income is considered as potential EMI outlay by the banks. Suppose your EMI outlay in Rupee terms arrives at Rs. 12000/-, now depending upon the number of years you want to go for finance, you can arrive at a ball park loan amount with following simple table

Documents generally required getting the loan processed

Pros and Cons of going for a used car loan vis-à-vis new car loan

Most important parameters one should keep in mind while signing on the dotted lines

While signing a used car (or a car loan per se) agreement kit can be a daunting process with hundreds of signatures required in almost a 100 page booklet. You may not have the time and patience to go through all these points thus most of them are skewed towards the lender. Still, as an informed buyer, following concise details should be asked from the banking/ dealer executive clearly explaining your loan deal in black and white (most of the lenders know it by MI copy or Disbursement Memo/ Sanction Letter)

Share:

Share

Tweet

whatsapp

Share