Demonetization, its Advantages & Points to Note
Everyone in India and abroad was surprised by the government's announcement to replace existing currency notes of Rs. 500 and Rs.1,000, which accounts for alm . . .
In India, the market for used cars has become more organised and is rapidly growing. While there are many reasons for the rise in sales of pre-owned cars, out of which, financial institutions offering loans at attractive interest rates, tops the chart. However, it is important for you to ask a few questions before taking an used car loan to purchase a second-hand car, make sure you are getting the best deal.
What is the interest rate?
The interest rate plays a vital role in deciding the size of interest amount you would pay throughout the tenure. The interest rate differs from lender to lender and from applicant to applicant. It depends on several factors like credit history, annual income, and debt-to-income ratio among other parameters, but when compared to personal loans, used car loans have a lower interest rate. The interest rates of personal loans lie between 10.99% and 24% while those of used car loans can be as low as 9.15% per annum. A personal loan can prove to be a cheaper option if you have a stellar credit score and/or employed with a renowned organisation at a good salary package.
Is there any processing fee?
Repayment of a loan does not involve returning the principal and interest amount only. There are miscellaneous charges as well just like the loan-processing fee. It is a one-time payment but of a sizeable amount. It can be a fixed amount or a certain percentage of the loan amount. To decrease the ownership cost of the cars, make sure you negotiate well with the lending institution to keep the processing fee low. Knowing the processing fee and any hidden charges will help you prepare your budget well.
What is the maximum loan amount?
Financial institutions offer up to 80 per cent of the market value of the used car as the loan amount. An officer assigned by the lender assesses the market value of the used car. For instance, if you are buying a used car for INR 6 lakh, but the officer assesses it be INR 5 lakh, the maximum loan amount you can get is INR 4 lakh in the best-case scenario. It means you need to pay the remaining amount, about INR 2 lakh as the down payment. If you need to borrow the entire INR 6 lakh as loan amount, you would have to opt for a personal loan.
What will be the loan tenure?
Used car loans are usually offered for the tenure of up to 7 years. The tenure depends a great extent on the age and condition of the car. So, if the car is quite old and most likely to require maintenance frequently, lenders would hesitate to grant you a long tenure. Therefore, you must not buy an old model with age of more than 5 years; otherwise, you might even find your loan application being rejected.
Do I meet the eligibility criteria?
The eligibility criteria is different for salaried and self-employed individuals. Also, the size of the annual income, the number of years of employment, credit score, all decide your creditworthiness. Get your credit history checked to make sure there are no anomalies left to check. Once through with all this, make sure you have the right documents like proof of identity, age, address, income, and signature verification .
The used car industry is growing rapidly and buying a pre-owned car has become much simpler. However, it should not be a hasty decision. Before picking the right model of the car and striking a good deal with the seller, you must also research about the terms and conditions of the used-car loan. Financial institutions offer a variety of car loans and the above-mentioned points should be considered before taking the final call.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.