According to data published in a financial daily, the pre-owned car market is expanding at a 15–18% growth rate, 6 times faster than the rate that the new-car market is growing at. What makes this market attractive is that you can drive home a premium hatchback, sedan or SUV without burning a hole in your pocket. Further, to making financing of the vehicle affordable, you can avail a used car loan from a reputed lender. However, when doing so, it’s advisable that you check the interest rates offered and how they match up to those of a new car loan and options like a personal loan for used cars.
Read on to know more about the loan interest rates on a pre-owned car loan.
Used car loan interest rates can be high, and depend on the car
A pre owned car loan is similar to a new car loan as in the former, the vehicle also serves as collateral for the loan. However, here, the vehicle has been subject to some amount of wear and tear and the loan particulars reflect this. Particularly notable is the fact that loan interest rates charged are higher. So, while your lender may offer new car loans at rates ranging between 11.50% and 13.75%, the loan interest rates charged on pre-owned car loans may range between 14.50% and 17.50%. This means that even though the cost of the car is attractive, the mode of finance may not be.
Since the car itself is integral to the pre-owned car loan, lenders conduct a valuation of the vehicle to ascertain its value. This depends on factors such as age, mileage, number of owners, and state of interiors. In fact, if the car is 7 to 8 years old, you may not even qualify for a loan and lenders may charge a higher interest rate, reduce the loan amount or shorten the tenor to mitigate the risks involved with lending. Hence, before you opt for a pre-owned car loan, examine the loan particulars to estimate its cost-effectiveness.
A personal loan can be more economical and is easier to obtain
When you consider that pre-owned car loan interest rates can run up to 17% and beyond, a personal loan for a used car becomes a viable solution for second-hand car purchases. The upside here is that solutions like the Bajaj Finserv Personal Loan for Used Cars offer finance starting 12.99% and personal loan eligibility does not depend on the state of the vehicle. Since no valuation is required, a personal loan for a used car is easier to obtain and the amount of finance you can get does not depend on the car’s market value, on-road price, or depreciated value.
With Bajaj Finserv, you get funding up to Rs.25 lakh and you can repay this over a maximum of 60 months. Apart from cost-effective loan interest rates, approvals are speedy, within 5 minutes of application, and disbursals are equally swift, within 24 hours of document verification. Further, you can use the Flexi Loan facility to gain access to finance on the go as it facilitates hassle-free withdrawals from the approved sanction.
Better your chances of securing a low rate of interest
Irrespective of whether you go with a pre owned car loan or a personal loan for a used car, one aspect lenders take care to examine is your personal credentials. Hence, as you plan your car purchase, it’s best that you take steps to enhance your financial profile as improved credentials translate into more favourable personal loan interest rates. This means possessing a regular stream of income, keeping your debt-to-income ratio low and above all, maintaining a healthy CIBIL score.
In case of the latter, you can use the online Bajaj Finserv CIBIL score check capability to know your credit score and then take steps to take your score towards 750 and above. Paying existing debt on time, limiting your credit utilization ratio, and applying for credit prudently help keep your CIBIL score in the green. Finally, in case of a used car loan, making a larger down payment can help you secure credit economically.
So, while buying a second-hand car may seem within reach, remember that loan interest rates on a pre owned car loan can be high. As a personal loan for a used car is easier on the pocket, stop to check your pre-approved offer from Bajaj Finserv. Doing so not only gives you access to economical credit, but also instantly, on customized terms.