With the advent of different car varieties making presence everyday in the Indian market, and also the rise in disposable income of individuals; more and more people tend to look for a car upgrade almost every two years. This has led to a huge used-car market, which has its own audience as not everyone fancies a brand new car or can afford one.

The popularity in the used car segment has led to more and more banks and independent financial institutions offering used car loans to attract this very audience. However, before you jump into a used car loan process, here are a few things that you must bear in mind to ensure that you bag the best deal without much hassle:

➤ Vehicle - Most banks and financial institutions do not offer used car loans to vehicles that are over five years old. This is because the risk towards providing finance for an older vehicle is higher. Banks estimate the loan value they will be willing to provide for a vehicle based on the original registration date of the vehicle and the age of the vehicle at the time when the loan matures.

➤ Loan Amount – As a used car borrower, you must keep in mind that the loan approval is usually not more than 70 to 80 percent of the used car value. Unlike new car loans where the vehicle has no risk of being damaged and banks readily offer 90% or even 100% car value as loan; used car loans have restricted approvals. So, the remaining money needs to be gathered by you, which will be paid directly to the car dealer. So, keep in mind the extra cost as down payment that you need to be prepared to give before the loan is disbursed.

➤ Interest Rates –Interest rates on used car loans are much higher when compared to new car loans. New car loan interest rates usually fall under 10% to 12% per annum range. However, interest rates for used car loans can range from 11% to 18% per annum. The final interest rate depends on the loan application, the condition of the used car, amongst other factors.

➤ Loan Term – The loan tenure for used car loan is also lower than new car loans and is dependent entirely on the age of the vehicle. Most banks do not provide a longer tenure for used car loans as they consider the age of the vehicle at the time of loan maturity into consideration. For example, if the age of the car is four years at the time of application, the bank will add the years upto the maturity of the car loan and anything above eight years, they will not approve.So, a car already four years old will probably get a maximum of four years of car loan tenure.

➤ Income –Used car loans are expensive and the maintenance costs involved in maintaining used cars makes it necessary for banks to ensure that the borrower has a stable income with a minimum income requirement that varies from one bank to another.

These are some of the main points the bank or an independent financial institution keeps in mind before disbursing a used car loan to any applicant. Letzbank has a variety of loan offerings including used car loans that allows you to compare different loans and also apply for used car loan directly at Letzbank website. You also get the service charge waived off on your loan application at Letzbank.

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