Used cars are in great demand these days. The reason for their growing popularity is affordable pricing, lower insurance cost, and cheap maintenance. If you have intentions to buy a second-hand car on EMI, here are some tips you must follow.
Check your credit score
Regardless of the type of loan you have applied for, your credit score is critical. Your credit score is a reflection of how you handled previous debts and how disciplined you are with current EMI payments. If you have a loan default on your credit report, it will be difficult for you to qualify for a loan. Similarly, if you have missed several EMIs in the past, your prospects for a loan for a second-hand car are close to none.
Here are some tips to improve your creditworthiness:
- Never put off your monthly debt payments. And if possible, automate them. Since it will debit the fixed amount from your account on a specific date, it eliminates the possibility of EMI skips. You must also check that your account has enough funds to cover the EMI amount.
- Check your credit report on a regular basis for any errors. If you discover any erroneous information on it, notify your lender right once.
- If you have a credit card, try not to use more than 30% of the available amount.
- Maintain a precise balance of secured and unsecured loans in your debt portfolio.
- Avoid submitting numerous used auto loan applications to various lenders at the same time.
Choose your car wisely
The sort of vehicle you purchase has a huge impact on whether or not you qualify for a loan. For example, if you are purchasing a car model that is no longer made by a car manufacturer, there is a very slim chance that a lender will approve you for a used car loan. Similarly, if the vehicle you are purchasing is nearing its deregistration date, you would be denied a loan.
The entire concept of this argument revolves around resale value. Cars with high demand have a greater resale value. The lender favours lending for such vehicles because they can reclaim all or most of the outstanding dues in the event of default.
Run an inspection
The biggest noticeable difference between a new and used car is wear and tear. Used cars have been on the road for a while and may have incurred significant wear and tear during that time. As a result, before finalising the car, you must inspect the following elements.
- Check to see if the car tyres are in good condition. If you find threads coming out of it, you must change the tyres immediately after purchase.
- Always keep the engine’s vibration in mind; unusual sounds when driving indicate that the car’s engine requires extensive repairs or replacement.
- Scratches are one of the most common things you will notice in a used car. A little bit of this issue is okay, but if you notice the major ones avoid buying that car.
Furthermore, there are a few elements that cannot be noticed with the naked eye or after a brief test drive. Some of these include battery problems, engine leaks, and so on. To identify such faults, you must seek the assistance of a local garage mechanic.
Understand the used car valuation
You cannot randomly apply for a second-hand car on an EMI loan before knowing the current market worth of your car. A car’s value is established after taking various things into consideration. Some of them include kilometres driven, modifications in the car, vehicle utilisation (commercial or private), etc.
Before we go further, it is important to note that some automotive modifications are banned in India, while others have a negative influence on performance. The lender will not approve your car in any situation. If the car has been modified in a way that affects its performance, the lender may still authorise a loan, but at a higher interest rate.
After determining the actual worth of the vehicle, the following step is to compare different lenders. Many people believe that all lenders’ rates and offers are the same. But this is not the case. It is recommended that you read the terms and conditions on the websites of different lenders. Compare processing fees, foreclosure charges, late EMI penalties, and other fees.
In case, the comparison process seems difficult to you, simply visit the used car lender website. You will get to compare every single aspect related to loans on second-hand cars.
Check all the documents
Before you submit your application for a second-hand car on EMI, ensure the required documents are in order. In the context of loans on second-hand cars, you will need a car registration paper, PUC certificate, insurance paper, service record book, original invoice, road tax receipt, and more. Apart from that, the lender also asks for KYC and income proof.
Obtaining a loan on a second-hand car is very simple. You will only need to follow the above checklist, and your second-hand car on the EMI application will be processed smoothly.