These days, the pre-owned (used or second-hand) car market is buzzing with activity. Most car companies have jumped on the bandwagon, establishing their own pre-owned divisions. Financial institutions are also in on the action, offering enticing car loans. Some even dangle the carrot of zero down-payment schemes. However, before you jump on the bandwagon, it’s essential to explore your financing options thoroughly. Here’s a breakdown of the avenues you can explore.
1. Pre-Owned Car Loans: Shorter Terms, Higher Rates
You have choices in abundance when it comes to pre-owned car loans – banks, non-banking financial companies (NBFCs), and even fintech platforms are in the game. But, before you seal the deal, it’s wise to compare interest rates and the loan’s terms. Manish Chaudhari, President and Chief of Staff at Poonawalla Fincorp Ltd, highlights that used car loans often carry slightly higher interest rates. This is because the risk associated with a used car’s value is greater. Currently, pre-owned car loan rates start at around 10%, whereas new car loans can be snagged at about 7%. The actual interest rate you secure can also depend on factors like your credit history and the type of vehicle you’re eyeing.
Gaurav Aggarwal, Director of Paisabazaar.com, adds, “Lenders assess the age and model of the vehicle and might value it lower than the seller’s asking price. This can result in a smaller loan amount. Lenders often impose restrictions on loan tenures for used cars. These limitations and restrictions can make pre-owned car loans less appealing for financing.”
2. Salaried Person’s Loan: Quick and Convenient
If you are a salaried individual, you can effortlessly secure an instant loan for salaried person to finance your used car purchase. The application process is open around the clock, allowing you to apply whenever suits you best. You’ll also enjoy flexibility in choosing your repayment period, ensuring it aligns with your financial capacity. Some lenders even promise disbursal of the approved loan amount in as little as 10 minutes.
3. Personal Loans: A Cost-Effective Option
Don’t disregard personal loans when considering how to fund your used car purchase. Experts suggest that those eyeing pre-owned car loans should also explore personal loan offers on their credit profiles. Personal loans often come with competitive terms. Depending on your creditworthiness, you might secure a more substantial loan amount, an extended repayment period, and lower interest rates.
4. Home Loan Top-Up: Leverage Your Mortgage
If you’re currently servicing a home loan, consider tapping into a top-up on your mortgage to finance your used car. Depending on your outstanding loan amount and tenure, this route can provide you with a larger loan at a lower interest rate and an extended tenure.
5. Loans Against Investments: Using Your Assets
Another avenue worth exploring is taking a loan against your investments, like fixed deposits or mutual funds, to finance your second-hand car. Loans against fixed deposits tend to be more cost-effective compared to personal or other secured and unsecured loans.
The world of financing for your pre-owned car is brimming with options. Whether you choose a pre-owned car loan, a personal loan, a top-up on your home loan, or a loan against your investments, certain factors should always guide your decision. These include the price of the used car and its affordability, along with the equated monthly instalment (EMI) that you’re comfortable with. Contributing a more substantial amount upfront for your used car purchase can lower both the loan amount and the monthly instalment. So, make an informed choice and drive away with the perfect pre-owned vehicle for you.