Last Updated:
Buying a used car makes sense, but dealer finance can burn a hole in your pocket. Know easy ways to avoid high interest, hidden charges and expensive EMIs. In this guide, we will tell you how you can save not thousands but lakhs of rupees by taking a cheap loan from the bank. If you are thinking of buying a second-hand car, then this information will be very useful for you.
Follow these tips while buying an old car.
Used Car Loan: At present, buying an old or used car has become a smarter option than a new car. Due to low price, low depreciation and ready availability, many people are turning to second-hand cars. But the biggest trap at the time of purchase is the dealer's finance.
Dealers often impose high interest rates, hidden charges and expensive loans in the name of comfort, which greatly increases the total cost. Whereas if you take a used car loan directly from your bank or NBFC, the interest rate can be much lower. With this you can save lakhs of rupees. In this article we will tell you how to avoid dealer finance and get a bank loan easily.
Why avoid dealer finance?
The biggest problem with dealer finance is that it seems convenient but is expensive. The interest rate on dealer loans can often be 12% to 18% or more. The dealer also adds commission to this, which he hides in the interest. Many times processing fees, insurance and other charges are also increased unnecessarily. outcome? Your EMI appears low but the total repayment amount becomes very high.
Why bank loan is better?
The interest rate on taking a used car loan directly from banks or financial institutions usually ranges between 9.5% to 15%. For example, used car loans in Punjab National Bank (PNB) start from 9.45%, while in SBI it ranges from 10.45% to 15.60%. Private banks like HDFC and ICICI also give competitive rates around 11% to 14%. Rates may be further reduced if you have a good CIBIL score (750+). Bank loans have transparent terms and conditions, no hidden charges and easy foreclosure or part-payment.
How to get approval?
There are many benefits of used car loan. First, the loan amount is lower because the car costs 30-50% less than new. This also reduces the EMI burden. Banks usually finance 80-90% of the car's valuation. The tenure can be from 5 to 7 years, which makes the monthly installment easy. Apart from this, if your salary is good or credit history is clean, then banks give quick approval.
Some important tips to avoid dealer finance-
- Get Pre-Approval: Before viewing the car, get a pre-approved loan letter from your bank. This creates pressure on the dealer and you can negotiate a better deal.
- Compare with multiple banks: Check rates on the website or app of SBI, PNB, HDFC, Axis, Bank of Baroda etc. Use online loan comparison portals like BankBazaar or Paisabazaar.
- Improve CIBIL Score: Good credit score is the biggest weapon for low interest rates.
- Prepare Document: Salary slip, ITR, bank statement, car papers (RC, Insurance, PUC) and KYC of the seller are required.
- Get valuation checked: To know the exact value of the car, get it checked by an independent valuer or an authorized service center. This will ensure correct loan amount.
The process is quite simple. Apply at bank branch or online. They get the car inspected, verify the documents and disburse the loan within a few days. The money goes directly into the seller's account.
About the Author
.jpg?impolicy=website&width=52&height=52 "authoring")
Ram Mohan Mishra, working as Senior Sub-Editor at News18 Hindi, is active in digital media since 2021 and is currently handling the Auto Desk. They provide car and bike related information in an easy, clear and reliable manner.read more
