Used Car Loan Process, Interest Rates in March 2020, Documents

Used Car Loan Process with Interest Rates in March 2020 in India. ICICI, HDFC, SBI, Tata Capital Loan Financing Documents from Bank Sanction to Disbursement

Used Car Finance

Used Cars Financing is not much different from New Car. However, unlike New Cars - where Sole Criteria Consideration is about Credit Eligibility of Individual - Used Car Financing Involves both Credit Eligibility and Asset Assessment i.e. Involves additionally Used Car Assessment by Financing Institution.

Important Consideration in Used Car Finance

• Age of Vehicle: Ageing of Vehicle (First Registration Date) plays an Important Role in Used Car Financing. Important is Bank Assessment of Vehicle for Valuation Price, Going to be Vehicle Age at time of Loan Maturity. Important to note that Cars less than 6 Years are what Considered for Finance.

• Loan Percentage: Unlike new cars wherein finance is provided upto 90% to 100 of ex-showroom price. Most of the Banks restrict loan amount in range of 70% - 75% of lower among (Valuation Price or Sale Transaction Price)

• Loan Tenure: Banks restrict Loan Tenure in Used Car - subject to Loan Maturity Date is not beyond 8 yrs from Date of Original Registration of Vehicle. For Instance - if Original Owner has bought the Car say in March 2015 - and selling it in March 2020 - then maximum time frame for which vehicle will be financed for Used Car Buyer will be 3 years . The Clause is applicable by most of Leading Banks / NBFC

• Used Car Loan Interest Rates: Used Car Interest Rates varies if its a Certified Used Car (means bought from Certified Used Car Dealer like Maruti True Value, Honda Auto Terrace, Mahindra First Choice) or from Direct Buyer with Differential Rates applicable 

Used Car Loan Interest Rates in March 2020

All Leading Banks - HDFC Bank, ICICI Bank, State Bank of India. NBFC like Kotak Mahindra Primus, Tata Capital and many more- all offer Used Car Loans. Interest Rate Varies based on 3 Criteria -

» Basis Car Model - (Hatch, Mid Sedan Petrol have lower rates as against Utility Vehicles or some Diesel Hatchbacks)

» Ageing - (Cars less than 3 year Old has lower financing interest rate as against 3 to 5 and higher than 5 yrs)

» Applicant Profile - (Salaried and that too with MNC or Professionals will get lowest rates as against Self Employed)

Car Loan Interest Rates on Used Cars in March 2020

• Certified Used Cars from Dealers

1. SBI Used Car Loan (Certified Used Cars): 11% to 12%
2. ICICI Bank, HDFC Bank Interest Rates (Certified Used Cars): 11.5% to 13.5%

• Direct Sale Purchase (from Small Brokers, Individuals)

1. Private Banks Interest Rates (Direct Sale Purchase): 12% to 15%
2. Nationalized Banks: Generally do not Finance

Additional Processing Fees: 1% to 2% of Loan Amount by Select Banks

Used Car Loan Process

Used Car Loan Documents (For Loan Sanction)

KYC Documents : PAN Card and Address Proof. 1 Passport Size Photograph with Signed Loan Application Form

Financials.: Last 2 Year Form 16 + Latest 3 month Salary Slips / Latest 3 yr ITR with Computation. Add on Latest 6 Month Bank Statement for Salary A/c or Current Account (Basis Profile - Salaried or Self Employed)

Work Proof: Office ID Card for Salaried or Landline or Post Paid Bill Statement at Office Address for Self Employed

Vehicle Documents: Copy of RC of Car seeking Finance. If Loan on Car - not Necessarily but Foreclosure Statement is also asked for.

Credit Assessment for Approval of Loan

Once documents are submitted Bank will initiate

» Field Verification of Applicant 

» Depute for Assessment of Vehicle for Valuation by Bank Agency

The Bank basis Field Verification and Valuation Report along with Loan Documents do credit check and Sanction or Reject the Loan in 2 to 5 Working Days

Disbursement of Loan (For Loan Disbursement)

Applicant then Submits Documents like

» ECS along with Security PDC as Repayment Mode

» Along with it is Signed Agreement, Insurance Cover Note, Loan NOC (if loan closed) or Statement if Hypothecation on Car

» Balance Money Paid as Cheque Entry reflecting in Bank Statement

» Original RC to be submitted to Bank - who undertake work through agent to ensure that RC Transfer is done with proper loan hypothecation

Bank then make a Disbursement Cheque in favor of Seller or Part Payment in Old Financier Name and Seller. Cheque is usually handed over to Seller - only once the Transfer Forms and Documents are handed over to Bank empanelled agency - who does RC Transfer work in RTO and to ensure HP is duly added to RC.

To be noted that Car Loan is a Secured Loan, its essential to provide RC with due HP (hypothecation) to Bank.