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Know the features, required documents for car loans

Know the features, required documents for car loans

With the rapidly changing economy, buying a used car becomes a doubly sensible purchase decision in financial terms. Not only is a used car cheaper than its new counterpart, but it also offers value for money when purchased and maintained in good condition. Thanks to the expanding used car market, you can get access to almost all new car models under the hood of a “used” car.

A used car loan can make this financial decision even easier, as it eliminates the need to spend the money in one lump sum. A used car loan makes it easier to own a vehicle, while at the same time incurring minimal additional burden from the car’s market value in the form of interest charges. Let’s take a closer look at what this financing option entails along with other important details to make an informed financing decision before buying a used car.

What is a used car loan? 

A used car loan is a secured financing option that allows you to take advantage of financing against asset collateral. In this type of loan, financing is granted against a pledge of the used car purchased. The approved loan amount is based on the current market value of the pledged used car. 

The maximum loan amount available to you for a used car loan is based on the lender’s loan-to-value (LTV) ratio. The LTV, or loan-to-value ratio, determines the maximum financing available as a percentage of the resale value of the property. For a used car loan, the LTV can be as high as 75% of the vehicle’s resale value with some of the best lenders. So, if the resale value of the used car you want to buy is Accounting and Bookkeeping Services in Australia

In case of non-repayment of loan debt or inability to repay, the lender recovers the funds by auctioning the mortgaged car. The loan-to-value ratio of a used car loan is usually lower than other secured loans because depreciation is taken into account when assessing the resale value of the vehicle. For older vehicles, depreciation is higher and the loan-to-value is lower. For this and other reasons, it is ideal to choose a used car that is in its second or third year of use. In addition, it is best to opt for a car that was previously in sole ownership, as it is preferred by lenders in the financing process.

The main features of a used car loan

The main and well-known features that make up a used car loan and its popularity include the following.

High quality financing

Used car loans are associated with high-quality financing that facilitates the purchase of the desired vehicle model.

Flexibility in loan tenure

Moreover, lenders also offer flexibility in repayment tenure so that borrowers can choose a suitable tenure for repaying the total loan liability according to their financial situation and the total loan amount available. For the best lending institutions, the flexibility of the term can be up to 5 years, which provides a reasonable margin for affordable credit management.

Competitive interest rates

With multiple lenders offering financing for used car purchases, borrowers have the advantage of choosing the most competitive interest rate option on the market. Moreover, since they are secured loans, they are automatically cheaper than personal loans that one may look for when reviewing available financing options for used car purchase. Considering the remarkable difference in interest rates between the two loan options, it can be beneficial to take advantage of a used car loan by a wide margin.

Flexi Loan

Some lenders also offer the Flexi Loan facility for a used car loan, which allows the borrower to make multiple withdrawals from a pre-approved loan amount. Lending institutions make this option even more attractive by charging interest only on the amount withdrawn, rather than on the entire approved loan.

Simplified application procedure

Credit institutions have also simplified the loan application process so that you only have to complete a few steps to apply. The ability to apply for a loan online has made accessing a used car loan easier than ever for individuals.

Instant online approval

In addition to applying for a loan online, you can now expect instant loan approval, which is hassle-free and fast. Make sure you meet all the requirements before you apply to increase your chances of getting a fast loan approval.

Minimum document requirements

The difficulty of availing a used car loan is further reduced with document requirements kept to a minimum. 

Eligibility and document requirements.

The eligibility and document requirements for a used car loan are simple. Meet the following eligibility criteria to apply for the loan.

  • Meet the age requirement of 18 years and over.
  • An employee must have been working for at least 1 year
  • Self-employed must be running their business for at least 1 year.
  • They should have a permanent residence in Australia that is stable for one year.

As far as paperwork is concerned, you just need to submit your KYC documents along with income proof and employment proof to apply. Some of the most important documents in this area are 

  • PAN card
  • Passport
  • Driver’s license
  • Utility bills such as electricity bills, water bills, broadband bills, etc.
  • Bank account statements for the past year
  • Pay slips for salaried employees
  • Financial statements such as balance sheet, profit and loss statement, etc. for self-employed applicants
  • Income tax return for the last one/two years for salaried and self-employed applicants
  • Partnership certificate/business registration certificate/MoA/MoU/GST registration certificate, etc. for self-employed applicants.

The list is only indicative and the lender may require you to provide additional documents as needed to confirm that you are eligible for the loan.

Reasons to qualify for a used car loan.

Some of the compelling reasons why you should avail of a used car loan include the following.

Eligibility for buying high-end car models.

For high-end models, even used cars can command a significant price, which can take a toll on your income and savings in one fell swoop. With a used car loan, you can free yourself from this financial stress while ensuring that you don’t compromise on your vehicle choice.

Easy repayment in EMIs

Combined with competitive interest rates and flexible terms, used car finance allows you to repay in easy installments that increase the overall affordability of the loan.

Deferring payment for vehicle expenses

One of the most important reasons why you should choose a used car loan is that you can defer paying the total cost of the loan over a longer period of time, rather than requiring payment in one fell swoop.

Used car loans are available for all makes and models of cars, so you can choose from a variety of options. If you meet the minimum requirements of the lender you choose, you can leave the financing of the purchase to the financial institution and only have to worry about paying the principal on time.

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