How to Minimise Your Second Hand Car Loan?

India’s automobile lending industry is one of the oldest and most developed in Asia, thanks to the growth of the lending market and consumerism in the country. Recent studies show almost 74% of finance penetration of auto lending across the nation, indicating significant growth throughout the financial year 2020.

The consumer automobile market in India primarily consists of 2 major categories, individuals who purchase new vehicles and customers acquiring second hand or used cars for their everyday use. Experts are predicting substantial growth in both the sectors, especially in the used car market, as an increasing number of prospective customers are becoming more aware of cost to utilisation factors.

Financing the purchase – Used car loan

Used car finance is one of the largest sectors associated with India’s automobile finance industry. It is credited to a vast channel of organizations working under a fixed guideline, increasing transparency and lowering the risks associated with lending. Willing customers can easily apply for a used car loan online by meeting only some simple eligibility criteria for the second hand car loan and experiencing zero-hassle in the entire process.

Affordable used car loan interest rates, as well as flexible tenor, also play a critical role in assuring customers to avail of finance instead of utilizing their savings.

Moreover, one can follow several methods to minimize their debt burden, ensuring timely and full repayment without incurring any financial strain.

Let’s take a look at how to minimize second-hand card debt to purchase a new vehicle.

How to reduce your second-hand car loan

  • With a larger down payment – A small down payment might offer upfront cash saving benefits; however, experts suggest making a larger down payment on a second-hand car loan to reduce the loan amount and incur more savings. Borrowers will have to pay significantly less amount as payable interest, which can prove beneficial throughout the loan tenor. It is one of the most important factors borrowers should know about used car finance.
  • With lower interest rates – Every borrower should perform thorough market research to learn about the interest rates offered by different financial institutions before opting for used car finance. It affects the payable EMI, ensuring easy debt pay-off within the repayment period.
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Consequently, it is unwise to opt for a lender who offers just the most competitive interest rates as well. These credits are associated with several different types of fees and charges, like processing fee, documentation charges, statement charges, etc. A lender offering the most affordable rate of interest might levy larger fees, effectively increasing the overall cost of the loan. Used car loan EMIs also include various other costs, like annual maintenance fee, loan cancellation and rebooking charges, legal fees, interest transfer fee, and NDC related fees. It is a common mistake to avoid while availing a used car loan, and borrowers must consider all these factors carefully and select a financial institution that offers them the most affordable line of credit.

  • With a low cost option – Choosing a compact car will reduce the total cost associated with the credit, helping keep the second hand car loan to an affordable amount. It is one of the most preferred methods utilised to keep the financial burden to a minimum; market reports suggest that nearly 60% to 70% of all used cars sold are mini and compact units. The preference is slowly shifting from more premium options as compact vehicles are offering a fuel-efficient, low cost option to consumers.

Other than all the above-mentioned factors, borrowers also have the option to avail a personal loan to finance the purchase of a used car. These are short-term, unsecured credits of the loan amount which can reach up to Rs.25 lakh. Note that such unsecured personal loans come without any end-use restriction, allowing a borrower to utilize it for any purposes. Personal loans may prove to be the ideal solution as these credits are offered against the minimum rate of interest and flexible repayment tenor.

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There are several financial institutions that offer these types of financial products. Companies like Bajaj Finserv even bring pre-approved offers for their existing customers, simplifying the application process and helping them save time. Such offers are available on both secured and unsecured advances, including personal loans, business loans, home loans, etc. You can check your pre-approved offer online by sharing only some essential details.

Following the tips mentioned above, borrowers can easily minimize their overall debt of used car finance. It can help save a substantial sum during the repayment period, without compromising with the total sum disbursed to purchase the second-hand vehicle.

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