Interest Rates Are Higher

After having decided which car you want to buy, when you approach a bank for loan, it sends a valuation expert to calculate the car value. The expert would make valuation based on the condition of the car, its model and the mileage it gives. The car he evaluates would be considered by the bank for lending you the loan amount.

So, for example, if a second hand Maruti Swift 2009 model is valued at 4 lakh by the expert, you would receive about 2.8 lakh, that is the bank provides you 70 percent of the car value as loan amount.

If you share a good relationship with the bank or NBFC or your car dealer has tie-ups with banks, then you can avail a loan equivalent to 80-90 percent of the car value.

The interest rate charged on loan is primarily based on the car model, age and your individual profile. In general “used car” loans interest are higher by 3 percent than new car loans. For instance, if the interest rates for a new car loan are 11-14 percent, then a "used car" loan would cost you 14-16 percent.

Usually banks’ interest rates are lower than that of the Non-Banking Financial Companies (NBFCs). Once you come up with the proposal and complete the required paperwork, it could take 6-8 working days for any bank or NBFC to process the document and sanction the loan.