How to manage your finances while buying a pre-owned car
Buying a pre-owned or used car comes with several benefits as it is more affordable. While it is not difficult to finance your pre-owned car, there are certain factors you have to keep in mind to avoid any additional financial burden. The most important point: the interest rate on the loan for a pre-owned car is higher than that on a new car loan. It is, therefore, better to make a substantial down payment and opt for a loan with a shorter tenure.
Here’s a step-by-step guide to help you through the process.
Before you start looking for a loan to buy a pre-owned car, assess your financial situation and set a budget. Consider your monthly income, expenses, and existing financial commitments. Decide on the maximum amount you can comfortably allocate for your car loan instalment without straining your finances.
Your credit score plays a crucial role in loan approval and the interest rate you receive. Check your credit score with credit bureaus like CIBIL, Equifax, or Experian. Adhil Shetty, CEO, Bankbazaar.com, says: “A good credit score (typically above 750) will enhance your chances of getting a loan with favourable terms. If your credit score is low, work on improving it before applying for a loan.”
Banks, non-banking financial companies (NBFCs) and online lenders offer loans for used car. Compare their interest rates, loan terms, processing fees, and other charges. Look for lenders offering you competitive interest rates. Look for lenders offering you competitive interest rates.
Lenders require specific documents to process your loan application. Generally, you’ll need identity proof (Aadhaar Card, PAN Card etc.), address proof, income proof (salary slips, IT returns, etc.), and bank statements. Prepare these documents
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