How Used Car Loans Work?

Buying a brand new car can prove to be costly deal. So, many people consider buying a pre-owned or used car. Prices of pre-owned cars are quite lower than their out-of-factory counterparts. Furthermore, used car is the best option to hone and sharpen your driving skills.

The prices of pre-owned cars vary according to their age, type, make and model. You may either pay for the car in cash or use a financing option like pre-owned car loan.

Borrowing a pre-owned car loan can be difficult and substantial amount of time and resources are spent to sanction it. Here is a clear-cut overview of how car loans work and what financiers consider before sanctioning a used car loan.

      1.      Age of the car plays a crucial role

The age of the car plays a crucial role in the loan sanctioning process. If the car is more than 15 years old, than borrowing options get ruled out. Similarly age of the car also decides the tenure of loan. For instance, if your prospect car is 2 years old, then you can easily get a loan for tenure of 5 years.

      

      2.      Model of the Car is a deciding factor

Principal amounts of pre-owned car loans vary according to the model and make of the car, along with its age. If the car model is still available in the market, then you will get a loan easily. However, if it has phased out, then financing becomes difficult.

     

      3.      Buying a car from established dealer aids the loan process

Established car dealers have organized process to take care of cars documentation. Proper documentation speeds up the loan sanctioning process.

     

      4.      Valuation of the car decides the nuances of the loan

On applying for a pre-owned car loan, banks and NBFCs like Magma send valuation experts to examine the car. Valuation is done on the basis of car model, manufacturing year, number of kilometers run, claims history, and the whereabouts of the car. Valuation and credit profile of the borrower determines the interest rate, loan value, and repayment options for used car loan.

Once valuation and loan estimation is complete, you have to submit important documents to the financier. Document processing and loan sanctioning takes around 8 to 10 working days.