Buying a Used Car with a Personal Loan - Tips to Remember
5 min read | 4 months ago
A personal loan is often a good way to cover sudden expenditure without having to go through the rigmarole of complicated documentation and paperwork like many other types of loans. It can also be helpful if you wish to purchase a used car. In fact, with growing disposable incomes and demand for personal mobility, used car purchases have gone up exponentially in recent years. According to a CARS24 study, the Indian used car market is expected to witness a compound annual growth rate (CAGR) of 15%, touching $100 billion in 2034 as compared to $25 billion in 2023. Do you also wish to apply for a bank loan to buy a used car? Here’s what you need to know.
What Can You Use a Personal Loan For?
There are several advantages offered by a personal loan that are worth noting. Firstly, you can expect personal loan fast approvals in comparison to many other types of loans, with minimal documentation and more customer-friendly eligibility criteria. Secondly, there are more competitive interest rates available these days with convenient tenures and flexible repayment options. Thirdly, personal loans are unsecured loans, meaning that you do not require any collateral or security for the same. Fourthly, the application procedure is simpler these days and you can easily do it online without having to visit the bank.
The best part is that personal loans can be used for almost any purpose, as per your requirements. You can use it for buying a used car or even two-wheeler along with consolidating debts like credit card dues and other loans, covering the costs of home renovations and repairs, buying gadgets and durables, investing in higher education, wedding costs, medical emergencies, and so on. You do not have to prove the purpose of the loan to the lender in most cases, which is a major benefit of applying for these loans.
So how do you choose the right used car for your needs? Here is a guide that will help.
How to Choose the Right Used Car - Some Tips
Now that you are clear on applying for a personal loan to purchase your used car, here are some tips that you should keep in mind to choose the right vehicle.
Always have a set budget in mind before you set out to buy a used car.
Compare available models in your preferred category, i.e., hatchback, compact SUV, compact sedan, sedan, or SUV across online platforms and dealerships.
Always choose a reputed used car dealer or brand before narrowing down your choices.
Inspect your chosen used car carefully, keeping an eye out for damages, dents, rusting, and the condition of the tyres, since these may lead to higher costs later on.
Try to examine the vehicle for signs of any paint touch-ups or other recent repairs.
Inspect whether the car has its original engine intact along with checking for any leaks.
You may consider taking an expert with you to ensure a smoother process.
Test drive the car, paying attention to the functioning of the brakes, gears, steering wheel, and headlights.
Keep an ear out for any engine noise, particularly while turning sharply and also over potholes and bumps.
Check whether you like the overall handling and ride quality along with the condition of the buttons and electronic features like the air conditioner, audio system, touchscreen display or interface, locking, power windows, and so on.
Make sure you drive for a minimum of 5-6 kilometers through different kinds of roads to assess the condition of the car.
The steering wheel should not excessively vibrate, and the gears should release seamlessly while the car should move ahead without jerking when you release the clutch.
The exhaust of the car should not emit any black or blue smoke when you accelerate, and it should not have any oil spouts too.
Once you are done with the test drive, you should check the odometer to assess the distance covered and ask for the car’s history including its maintenance and service records.
Examine the battery for any indications of acidic wear and tear and also the expiry date and overall maintenance.
Inspect the documents closely including the original registration documents (RC book) along with the insurance documents, tax documents, and the PUC certificate.
Make sure you negotiate the final used car price with the seller/used car brand or platform. Do your homework on the market prices of similar vehicles and do not be in a rush to take any offer that seems too lucrative.
Now that you’re done choosing your used car, here are some tips on applying for personal loans to buy the same.
General Tips on Applying for Personal Loans to Buy Used Cars
Here are some general tips to ensure a smooth loan process to buy your used car.
Always try to make a higher down payment and apply for the remainder as your personal loan. Do not forget the costs of insurance and any additional accessories/warranties if you need the same.
Check your credit score before applying for a personal loan, making sure that it is 750 or above in order to get better terms and lower rates of interest.
Compare multiple lenders, from NBFCs to small finance banks, based on their loan criteria, interest rates, and other conditions.
Make sure you have sufficient income and meet the age criteria while applying. Stable employment always helps in obtaining a personal loan without any hassles.
Keep your KYC, income proof, and other documents ready before applying.
In case you do not have a credit history or a lower credit score, you may consider a co-applicant (family member or spouse) for the personal loan. This will help you qualify for the funding at a better rate of interest.
If possible, you can get pre-approval on a personal loan from your trusted bank if you have a set budget. You can then venture ahead with purchasing the car without having to worry about loan formalities any longer.
Conclusion
These are some tips that you should keep in mind when you apply for a bank loan to purchase a used car. Make sure you choose a suitable car model, depending on its condition and your budget and also apply for a personal loan after checking for all the aspects mentioned above.
FAQs
Can I use a personal loan to buy a used car?
Yes, a personal loan can be taken for buying used cars, along with several other purposes. These loans do not have any end-usage restrictions on the funds.
What documents do I require for a personal loan?
You will mostly require your address and identity proof documents along with your bank statements and salary slips/income tax returns as proof of income.
What is the tenure for a personal loan?
You can apply for a convenient tenure based on your repayment ability. In most cases, tenures may go up to 36 months or 3 years.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
