10 Important Things to Consider Before Taking a Used Car Loan in India

Buying a used car in India can be a smart choice – you can save money and still get a great ride. But if you’re like most people, you’re going to need a little help to pay for that ride. That’s where used car loans come in.

However, taking out a used car loan in India can be a daunting task, especially if you’re not familiar with the process.

In this article, we’ll take a look at 10 things you need to consider before taking out a used car loan in India, so you can make an informed decision and not end up driving a car that’s older than your grandfather.

10 things to consider before taking a used car loan

used car loan

When it comes to purchasing a used car in India, there are many things to consider before diving headfirst into the world of car loans. Taking a used car loan is a big financial decision, and it’s important to be well-informed before making a commitment.

Here is the list of 10 things you need to consider before taking a loan for Pre-Owned Car Loan in India. :

Used Car Loan Interest Rates

Now, I know what you’re thinking – interest rates? . But trust me, they’re important. Like deciding whether to put on pants before leaving the house, interest rates are something you shouldn’t overlook.

The interest rate you get on a used car loan can make a big difference in how much you end up paying for that ride, so it’s worth taking some time to do your research.

Used Car Loan

So, what affects used car loan interest rates in India? Well, there are a few factors. The first is the credit score of the borrower. If you’ve got a good credit score, banks are more likely to offer you a lower interest rate.

And if you’ve got a bad credit score, well, let’s just say you might want to start practicing your hitchhiking thumb.

There are ways to get the best interest rates on a used car loan. First, shop around. Don’t settle for the first loan offer that comes your way.

Second, consider a secured loan, where you put up collateral like your house or your firstborn child (just kidding) to get a lower interest rate.

And third, pay attention to the fine print. Some lenders might offer you a low interest rate, but then sneak in some hidden fees that jack up the overall cost of the loan. Don’t let them pull a fast one on you.

With these tips, you’ll be well on your way to getting a great interest rate on a used car loan in India. Just remember, if a lender offers you an interest rate that’s too good to be true, it probably is. Don’t be fooled – your wallet (and your future self) will thank you.

Down Payment

Nobody likes parting with their hard-earned cash, but unfortunately, when it comes to taking out a used car loan, a down payment is usually required.

The minimum down payment required can vary depending on the lender, but generally, it’s around 10-20% of the car’s value.

A higher down payment can actually be a good thing, because it can lower the loan amount and the EMIs (equated monthly installments, for those of you not up on your financial lingo).

So, while it might be tempting to skimp on the down payment and save some cash in the short term, you could end up paying more in the long run.

Used Car Loan vs. Personal Loan

When it comes to financing a used car purchase in India, there are a few options available – one of which is a personal loan. So, which one should you choose? Well, it depends on your individual financial situation.

A used car loan is specifically designed for buying a used car, so the loan amount and tenure are typically tailored to fit the value and age of the car.

used car loan

Plus, interest rates on used car loans are usually lower than those on personal loans, since the car serves as collateral.

So, how do you decide which one is right for you? Consider the loan amount you need, the interest rates and EMIs, and your overall financial situation.

If you’re buying a used car and don’t need a large loan amount, a used car loan might be the best choice. But if you’re looking for a more flexible option and don’t mind paying slightly higher interest rates, a personal loan could be a good fit.

And if all else fails, there’s always hitchhiking.

Loan to Value (LTV) Ratio

Now, let’s talk about Loan to Value (LTV) ratio. No, it’s not some complicated math equation that requires a Ph.D. to understand. It’s simply the percentage of the car’s value that you can borrow as a loan.

For example, if the car is worth ₹5,00,000 and the LTV ratio is 80%, then you can borrow up to ₹4,00,000 (80% of ₹5,00,000) as a loan.

Why is this important? Well, a higher LTV ratio means a higher loan amount and lower down payment, but it also means higher EMIs and interest rates.

On the other hand, a lower LTV ratio means a lower loan amount and higher down payment, but it also means lower EMIs and interest rates.

So, how do you optimize your LTV ratio? Simple – put down a higher down payment. This will not only lower your LTV ratio but also lower your loan amount and EMIs. It’s a win-win situation.

Documentations for used car loans

Just when you thought you could escape it, applying for a used car loan in India comes knocking on your door with a checklist of documents as long as your arm. Don’t worry, it’s not as complicated as it seems. Here are the documents you’ll need:

  • ID proof: PAN card, Aadhaar card, passport, driver’s license, or voter ID card.
  • Address proof: Aadhaar card, passport, utility bills, rental agreement, or property papers.
  • Income proof: salary slips, bank statements, or income tax returns.
  • Employment proof: employment letter, appointment letter, or business registration.
  • Car-related documents: registration certificate, insurance papers, and pollution under control (PUC) certificate.
Used Car Loan

Make sure to have all of these documents handy before you begin your application. Trust us, it’ll save you a lot of time and headache later on.

Loan Amount and Tenure

If you go for a higher loan amount, the monthly EMIs will also be higher, which could be a problem if you’re already struggling to make ends meet.

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On the other hand, if you go for a shorter tenure, your EMIs will be higher, but the overall interest paid on the loan will be lower.

So, what’s the right balance? Well, it depends on your income, expenses, and other financial commitments. As a general rule of thumb, your monthly car loan payments should not exceed 10-15% of your monthly income.

Also, consider your financial goals and how the loan repayment will impact them.

Remember, the longer you take to repay the loan, the more interest you’ll pay in the long run. So, choose a loan amount and tenure that you can comfortably manage without putting too much strain on your finances.

Type and Age of Car

Ah, the age-old question of “new car smell” versus “used car savings.” As tempting as it may be to splurge on that shiny new ride, a used car can be just as reliable, and can save you a ton of cash in the long run.

But before you go and pick up that used clunker on the side of the road, it’s important to know that not all used cars are created equal.

Used Car Loan

When taking out a used car loan in India, it’s important to consider the type and age of the car you want to buy. A lender may have restrictions on the age and mileage of the car, which can affect your loan approval and interest rate.

A newer car may have a higher resale value, which can make it easier to secure a loan and may result in a lower interest rate. However, a used car that’s in good condition and has been well-maintained can also be a smart investment.

It’s important to do your research and consider the reputation of the brand and model of the car you want to buy, as well as its fuel efficiency, safety features, and repair costs. By choosing the right type and age of car, you can get the most out of your used car loan in India.

Verification of Registration Certificate of Car

When it comes to buying a used car, one of the most important documents to verify is the registration certificate (RC) of the vehicle. The RC is proof of ownership, and it contains vital information about the car, such as the engine and chassis number, the year of manufacture, and the vehicle’s registration number.

Verifying the authenticity of the RC is essential before applying for a used car loan in India. A fake or tampered RC can lead to legal issues and financial loss. So, how can you check the authenticity of the RC? Here are some tips:

  1. Check the details on the RC: Verify that the engine and chassis numbers match the details on the car, and ensure that the registration number is correct.
  2. Look for the hologram: A genuine RC will have a hologram on the front page. Check the hologram carefully to ensure that it is not tampered with.
  3. you can also verify the registration certificate of a used car on the Parivahan Sewa website. Here’s how:
    • Visit the Parivahan Sewa website (https://parivahan.gov.in/parivahan/)
    • Click on the “Online Services” option from the menu and select “Know your vehicle details”.
    • Enter the vehicle registration number in the given field and click on “Search Vehicle”.
    • The website will display the details of the vehicle, including the owner’s name, registration date, and the vehicle’s make and model.
    • Verify the details of the registration certificate with the information provided on the website.

Approval Process of Used Car Loan

It can be a real pain in the you-know-what, but it’s a necessary step in securing a used car loan in India. Here are some tips to make it a little less painful:

  1. Double-check your documentation: Make sure you have all the necessary documents in order before applying for a loan. This includes proof of income, identification, and proof of residence. If the lender asks for any additional documents, be sure to provide them in a timely manner.
  2. Get pre-approved: If possible, try to get pre-approved for a loan before you start shopping for a car. This can save you time and give you a better idea of what kind of loan you can qualify for.
  3. Choose a reputable lender: Do your research and choose a lender with a good reputation. Look for lenders with competitive interest rates, flexible repayment terms, and good customer service.
  4. Be honest: Don’t try to hide any information from the lender, as it could come back to haunt you later. Be upfront about your financial situation, credit history, and any other relevant details.
  5. Be patient: The loan approval process can take time, so be patient and don’t get too frustrated if things don’t happen as quickly as you’d like. Keep in touch with your lender and follow up regularly to make sure things are moving along.

With these tips in mind, you should be able to navigate the loan approval process with confidence and ease.


Phew! That was a long ride, but we finally made it. Now, let’s recap what we have learned about taking a used car loan in India.

First, we talked about the importance of interest rates when taking a used car loan. After all, who wants to pay more interest than necessary? Then, we looked at the minimum down payment required for a used car loan and how it affects the loan amount and EMIs.

Next, we compared the benefits and drawbacks of taking a used car loan versus a personal loan in India. We also learned about loan to value (LTV) ratio and how it affects a used car loan, along with the necessary documentation required for a smooth loan approval process.

We also discussed how the loan amount and tenure affect the monthly EMIs and the overall cost of a used car loan. We learned that choosing the right type and age of car is crucial when taking a used car loan, and we discussed how to assess the condition and value of a used car before applying for a loan.

We then talked about the importance of verifying the registration certificate of a used car before applying for a loan and provided tips on how to check its authenticity.

Finally, we went over the loan approval process for a used car loan in India and provided tips on how to speed up the process and avoid common mistakes.

Remember, taking a used car loan in India is a big financial decision, and careful planning and research are essential to make the most of it. So, take your time, do your due diligence, and drive away with a smile on your face and a great deal in your pocket!

Our Suggestion: Best Banks for used car loan in India

Based on our research and analysis, some of the best banks for used car loans in India include HDFC, Axis Bank, Mahindra Finance, and ICICI Bank.”

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