Based on a recent report, the second-hand car loan market is anticipated to grow at 15% in FY22. Amidst the looming threat of COVID-19, individuals found personal cars to be the safest mode of transportation, hence this shift towards availing of personal cars.
However, due to new cars’ exorbitance, individuals opt for second-hand cars as affordable mobility alternatives. Another reason why the demand for used cars has skyrocketed is the availability of varied second hand car finance options. Hence, individuals willing to purchase a second-hand car must know the different financing options and necessary financial backup.
Know everything about the best way to finance a second-hand car
Here are the varied second-hand car finance options that will help borrowers receive financial backup and dodge monetary burdens:
1. Conventional second-hand car loan
Borrowers can easily fund a second-hand car using a second-hand car loan. It is a secured credit option where the vehicle serves as the security. The principal amount and interest rate are based on the car’s worth. As long as borrowers repay the loan principal, lenders will exercise conditional ownership over the vehicle.If borrowers fail to repay the loan amount, lenders will seize the car. However, owing to the low resale value of the used car, borrowers get used car loans at a higher interest rate. Moreover, a car loan is offered with a higher interest rate, which increases the total cost of borrowing. Also, the repayment tenor depends on car’s age.
2. Top up loan
One effective way to fund a second-hand car loan is to avail of the top up loan on and over the existing home loan. A top-up loan helps borrowers derive high quantum loan principal at lower interest rates. As the lender is already aware of borrowers’ profiles and repayment records, borrowers are not required to go through lengthy documentation procedures, helping them save turnaround time. However, borrowers need to take up a top up loan based on the residual repayment tenor. Otherwise, opting for a top up loan can prove counterproductive.
3. Personal loan
Borrowers can effectively avail a personal loan to fund a second-hand car. A personal loan is a versatile credit option and comes with easy-to-meet eligibility criteria and a less-stringent documentation procedure. Moreover, the absence of collateral adds to the easy accessibility of the financing option.
4. Unsecured loan
Besides knowing what is unsecured loan and how it help receive funds during a monetary emergency, borrowers must know the numerous advantages of the credit option, including-
- No-end use: Another notable benefit of availing personal loans is that they have no end-use restrictions. Borrowers can use the loan amount at their discretion to fund varied financial requirements like purchasing a vehicle, child’s education, fund marriage expenses, etc.
- Rapid disbursal: This is perhaps the most significant benefit of a personal loan. With a personal loan, borrowers can access high quantum within 24 hours.
- Builds credit score: Availing of a personal loan and repaying it within the loan tenor helps enhance the credit score. On the other hand, missing out on EMI payments brings down the CIBIL score. If credit score plunges, borrowers must know things to improve personal credit score.
- Minimal documentation: Borrowers can easily apply for a personal loan by following simple paperwork, making this credit option feasible. Borrowers are generally asked for KYC papers, proof of address, income address, etc.
- Long repayment tenor: Personal loan comes with flexible loan terms stretching from 1 to 5 years, helping borrowers repay the loan amount on time. Hence, borrowers must find the right personal loan tenor that best suits one’s repayment capability.
Besides evaluating loan tenor, borrowers should also calculate the EMI payouts using a personal loan EMI calculator, helping make timely repayments of loan amount.
A personal loan has the following easy to meet eligibility criteria, making it an ideal second-hand car finance option-
- Individuals must be residing Indian
- Applicants must fall in the age bracket of 21 years to 67 years
- Individuals should also have a credit score of 750 and above
Besides knowing the numerous advantages of this financing option, borrowers should also be aware of the mistakes to avoid while applying for a personal loan.
In addition, potential borrowers can reap the advantages of exclusive pre-approved offers. Leading finance institutions like Bajaj Finserv extend these offers on various financial products like personal loans, business loans, credit cards, etc. These offers streamline the loan application and ensure a hassle-free experience throughout the repayment tenor. Intending individuals can check their pre-approved offers by submitting their names and contact details.To sum up, second-hand cars have become the most convenient commute for individuals looking for affordable alternatives to a new car. However, borrowers can easily choose from multiple second-hand car finance options mentioned above to make the purchase comfortable.
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