Purchasing an old car will enable you to save from depreciating value as well as be a better investment than a newly purchased car.

Things to Know About Loan on Old Car:

● Even though old cars have already taken a hit on depreciation, the banks levy a higher interest rate (about 2-3% more) on pre-owned old cars than on new cars. Thus, it is very crucial to compare the interest rates.

● Some lenders may offer special deals or reduced interest rates if the insurance on the old car is also availed from the lender.

● Old cars might not have to be pre-owned or used cars, old cars can also include older models of unsold cars from the dealership. These cars are often a better deal, as the dealers let these cars go for a lower profit margin to make room for newer models. Therefore, it is very important to look for the terminology and definition in the loan’s clause.

● While most banks have a processing fee, some banks may additionally charge for documentation and CIBIL report charges.

● Some lenders may offer zero-down payment loans for new cars, there are mostly no such things for old cars. The loans will usually account for up to 80% of the market value of the car (at the time of taking the loan).

● Used cars involved in accidents or are flood-damaged, may have higher interest rates.

● There might be a limit on the age of the car. With an acceptable range for the car being no older than 10-12+ years as well as the car should not be newer than 5 years (in most cases).

● The tenure for Loans on Old Car will be limited to 5-7 years in maximum.

● The borrower has to be required to have a job with a stable income. For most lenders, the minimum required age for applicants is 21-23 years, while the maximum is around 65 years.

What to Avoid while availing Loan on Old Car?

● Availing loans on additional options of the cars.

Some lenders may offer loans on additional features/gadgets that the old car might need. However, it is advisable to forego such additions to the loan amount, as the extra amount will levy more interests which will also increase the monthly EMIs.

● Maxing out the loan tenure:

While having a longer loan tenure may ease out the monthly payable EMIs. Nevertheless, this will increase the interest and will make the car have a negative return on investment. This is usually the case when the usability value (i.e. value of the car after a certain amount of use by the borrower) will be significantly less than what the borrower paid for repayment with the interest.

● Not paying attention to the CIBIL Score:

Lenders may charge extra interest for borrowers with a lower than required CIBIL score. The amount of expenditure in terms of payable debts/credits per month (for the borrower) must not be more than half of the borrower’s income. If it is more than half, the lenders may even decline to approve the loan.