Research shows that people go for second-hand cars most of the time while buying for the first time. This can be a great way to own a car without having to hit your wallet too hard. However, there’s not a lot of awareness that you can get a used car loan. This makes the process confusing. If you are thinking of buying a pre-owned car with a loan, here are some points you need to remember.

1. Interest Rates Are Generally Higher

Despite there being a high demand for second-hand vehicles, primarily cars, lenders seem hesitant to offer loans for their purchase at affordable rates. When lenders are approached for this kind of finances, they generally offer interest rates at least 3-4% higher than standard car loans. This can be avoided by keeping your credit score high. When lenders see that you can pay back the loan amount, they are more likely to provide you with lower loan interest rates for used cars using second hand car on emi. There may also be an option of free prepayment, helping your cause.

2. Loan Amounts Are Generally Lower

Car loan providers usually provide from 50 to 60 per cent of the requested car value. This leaves you with the responsibility to pay the rest of the amount. Banks do this through their valuation process before providing you with the loan amount. Hence, keep your credentials high and the value of the second-hand car on the lower end. However, some lenders offer loans depending on your eligibility and not the value of the car.

3. Documentation Needs To Be In Order

Due to the complexity of the paperwork, most banks will only approve a used car loan rate if the car’s title has already. The lender will likely refuse to provide financing if the registration certificate is not in the owner’s name or if the insurance has expired.

4. Tenure Would Be Shorter

The tenures of a used car loan or a traditional loan are generally the same, i.e. five years. If the lender does not have much confidence in the deal, the tenure can be lower and the interest rate higher. They may also include clauses levying heavy charges for failure to repay the amount in the contract. This will mean you might have to face hefty penalties and fees if you miss paying an EMI.

5. Approval Process Is Longer

Since the concept of applying for a loan to buy a second-hand vehicle is relatively new to a lot of people, the process is not entirely streamlined. The approval process can take a few visits to the institution and meeting officials with documents. Even after approval, the funds may take up to a week to reach your account.

These loans can also be replaced by personal loans that have a more streamlined process, and you might end up not having to pay anything out of your pocket at the initial process! Check Muthoot Capital for more information.