Who Provides Used Car Loan In India And How To Apply For One

Buying a car is a significant milestone for many, but it doesn’t always have to mean driving home a brand-new vehicle. If you’re someone who finds the price of a new car a bit steep or just prefers the value a pre-owned model offers, opting for a used car is a smart alternative. And if you're short on funds, a used car loan can help make that purchase more accessible. In simple terms, a used car loan is a financing option that allows you to buy a second-hand vehicle through a hassle-free loan application process.

Although used car loans are purpose-specific and generally offer better terms for vehicle financing, a personal loan could be a viable alternative, especially if you're managing multiple financial obligations.

Who Offers Used Car Loans In India?

Many banks and financial institutions in India provide financing options for buying pre-owned vehicles, each offering varying interest rates, loan tenures and eligibility requirements. Let’s take a look at few such entities:

1. HDFC Bank: Offers used car loans of up to Rs 2.5 crore, with financing available for up to 100% of the car’s value. The interest rates range from 11.50% to 17.50% per annum, depending on the applicant’s profile.


2. State Bank of India: SBI provides used car loans starting from Rs 3 lakh up to Rs 1 crore. The interest rates vary between 11.75% and 15.25% per annum.


3. ICICI Bank: The bank offers flexible used car loans with interest rates beginning at 11.25% per annum. The exact rate is subject to factors such as the applicant’s CIBIL score and the segment of the car. Loans can be availed for a tenure of 12 to 84 months, with financing up to 100% of the car’s assessed value.


4. Axis Bank: It extends loans covering up to 100% of the used car’s value, with interest rates ranging between 13.55% and 15.80% per annum.


5. TVS Credit: Funding is available for up to 95% of the car’s value. TVS Credit offers loans without requiring income proof. Borrowers can choose repayment tenures ranging from 12 to 60 months, with interest rates between 13% and 18%.


6. Shriram Finance: Shriram Finance offers up to 85% financing based on eligibility, with interest rates starting at 10% per annum. Loan tenure extends up to 48 months.

In addition to the above, several other nationalised and private banks also offer competitive pre-owned car loan products tailored to various customer needs.

Personal loans of up to Rs 50 lakhs can be accessed through the Moneycontrol app or website, where you can compare offerings from eight major lenders. The entire process is digital, with some lenders approving and disbursing funds within minutes. With interest rates starting at 10.5% per annum, a personal loan can provide the flexibility to not only fund a used car but also manage other pressing expenses.

Eligibility Criteria For Used Car Loans

Most lenders follow similar eligibility standards for used car loan applicants. You must be:

• Between 21 and 65 years of age.


• Either salaried or self-employed with a steady source of income.


• Holding a satisfactory credit score (usually above 700).

A good repayment history and stable employment increase your credibility and can help in securing more favourable loan terms. The interest rate offered to you will largely depend on your income level, credit profile, and the value of the car.

How To Apply For A Used Car Loan

Applying for a used car loan can be done either online or by visiting the nearest branch of the lending institution. Here’s how you can go about it:

1. Compare offers: Begin by researching different loan providers. Use trusted online platforms to compare interest rates, processing fees, tenures and repayment flexibility.


2. Check loan terms: Pay close attention to the lender’s policy on maximum LTV, loan duration, and whether they require income proof or vehicle inspection.


3. Prepare your documents. You will generally need:
   -Identity proof (Aadhaar Card, Passport)
   -Address proof (utility bills, rental agreement)
   -Age proof (PAN Card, Driving Licence)
   -Income proof (payslips, bank statements, ITR)
   -Vehicle documents (RC book, insurance, etc.)


4. Submit application: Fill out the application form online or in person and upload or submit the required documents.


5. Valuation and approval: The lender will assess the vehicle's current value — often through a physical inspection — and then process your application. Once approved, the sanctioned loan amount will be credited directly to your bank account or to the car seller.

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Understanding EMI And Repayment

Used car loans, like other vehicle loans, are repaid through Equated Monthly Instalments (EMIs). To understand how much you’ll be repaying each month, make use of online EMI calculators provided by banks or financial websites. These tools help you estimate your monthly outflow based on the loan amount, interest rate, processing fee and tenure.

While a used car loan is tied to the value of the vehicle and requires specific documentation, it’s worth considering a personal loan if you're looking for more flexibility in how you use the funds. You can borrow up to Rs 50 lakhs from eight top lenders through the Moneycontrol app or website. The process is fully online, and in some cases, the loan is approved and sent to your account within minutes. Interest rates start at 10.5% per annum. This can be helpful not just for buying the car, but also for other costs like insurance, repairs, or adding new accessories.

Overall, with a wide range of options available, getting a used car loan in India would not be difficult. But it’s important to choose a lender wisely, understand the loan terms and ensure the car you intend to buy is in good condition and has a clear ownership history.