For the past few months, demand for second-hand cars has skyrocketed. According to a recent report, used car sales are 1.5 more than new car sales. This market is further expected to be twice as big as the new car market by FY25.
One of the major factors attributing to this ever-growing pace in the used car industry is the easy availability of a second hand car loan. However, second-hand car financing is not a viable option for specific individuals, given the high-interest rates associated with these loans. In such circumstances, borrowers can consider various other affordable alternatives to finance their car purchases.
Four alternatives to a second-hand car loan
Mentioned below are a few options through which one can fund their car purchase at ease:
Peer to peer lending
One of the best alternatives to a second-hand car loan is a peer to peer lending. This financing option allows individuals to seek loans from investors without having to involve lending institutions.
The P2P lending platform allows investors to go through a list of verified borrowers before they fund them. Further, lenders can broaden their investments by lending considerable amounts to various borrowers. Typically regarded as crowdfunding in India, P2P lending has been garnering immense popularity recently.
P2P also extends lucrative cost benefits to borrowers. The process is fast and hassle-free, which further adds to its benefits. Therefore, prospective buyers can utilize these platforms to get a loan and purchase their dream car after meeting the eligibility criteria.
Top up loan
A top-up loan is one of the affordable ways to finance various financial needs. Further, the documents required for this loan type are minimal because the lender already has the required documents.
Top-up loans do not come with end-use restrictions. Therefore, you can use the amount for a variety of reasons. Also, individuals looking for high ticket financing can avail the best personal loans. However, individuals must know the common mistakes to avoid when availing of personal loans for used cars.
Pre-owned vehicle platforms
As an alternative to a personal loan app, prospective borrowers can also consider financing from pre-owned vehicle platforms.
Various pre-owned vehicle platforms feature tie-ups with financial institutions. These platforms provide second-hand car loans at competitive interest rates. This is because pre-owned vehicle platforms evaluate the borrower beforehand and certify them accordingly. Resultantly, lenders can quickly identify a creditworthy borrower. As their risks are reduced, financial institutions are willing to disburse the loan amount at a lower interest rate.
Personal loan
There are various ways a personal loan can help you meet your financial needs. This financing option comes with no end-use restrictions and is easy to get. With less stringent eligibility parameters and minimal documentation, a personal loan for salaried or self-employed individuals is an ideal alternative to funding a second-hand car purchase.
However, individuals must meet or exceed the eligibility parameters to avail of a personal loan at competitive rates. One way of meeting eligibility is maintaining a high CIBIL score. One can keep a decent credit/CIBIL score by:
- Making timely debt payments
- Maintaining a good credit mix
- Avoiding too many debts at the same time
- Maintain a low FOIR
- Maintaining a healthy credit utilization ratio
Also, interest rates for personal loans may vary according to lenders. Therefore, individuals must conduct proper market research and choose a lender that offers a loan at the most reasonable term.
Moreover, several leading NBFCs across the country, like Bajaj Finserv, extend pre-approved offers on various financial products like business loans, personal loans, etc. These offers are available for existing customers and help in streamlining the application process. You can easily check your pre-approved offer in seconds by feeding your name and contact number.
As mentioned above, there are various ways through which you can fund your car purchase. Moreover, if the terms relating to a second-hand car loan seem viable to you, you can opt for the same after conducting proper research. Make an informed decision by considering all the factors that may affect the loan affordability and choose a financing option that suits your repayment capacity.
