What Are the Documents Required While Applying for a Used Car Loan?
Today, getting a loan for a pre-owned car is quite easy and simple. The entire procedure may be completed within a few days. However, to ensure the process is quick, hassle-free, and convenient, before applying for the loan you should keep the necessary documentation ready.
Here are the documents that you will need to apply for a used car loan:
- Application form
- Recent color photograph
- Identity proof, such as voter ID, PAN card, passport, or Aadhar card
- Address proof, which may be either:
- Aadhar card
- Voter ID
- Utility bill like gas, electricity, or telephone expenses
- Income proof like salary slip, income tax returns (for self-employed applicants) along with audited financial statements (profit and loss account and balance sheet)
- Copy of the vehicle’s registration certificate
- Copy of the auto insurance policy
- Valuation of the vehicle undertaken by a lender-authorized professional
- Signature verification
Importance of documents
The documentation required to apply for a second-hand car loan is necessary to enable the lenders to determine your credibility. When you submit the aforementioned documents along with the used car finance application form, the financial institution verifies them before approving your loan application. Moreover, the lender conducts a background check to understand your financial stability.
Eligibility criteria for a used car loan
When you have a good credit score, your used car loan eligibility increases—the lender is assured of timely repayment based on your positive history. In addition to the credit score, other eligibility criteria that the lenders consider include your income, age, and employment status, among other aspects.
Things to know if you have a low credit score
Not everyone enjoys high credit scores. Does this mean that you will not be able to avail of a pre-owned car loan with a low score? No, you may still be eligible for a loan, albeit with certain restrictions like a lower loan amount or a higher used car loan interest rate. Financial institutions may ask you to also submit credit card statements or mortgage details before approving your application.
What you should know about hypothecation
When you buy the car with a loan, the vehicle is hypothecated in the lender’s favor. This is to ensure that the lender can recover the loan amount in case you default on repayment. After you repay the entire loan amount, it is important to remove the hypothecation.
Now that you know about the documentation required for a used car loan, you must submit these to a reliable financial provider. With a presence in more than 1,200 locations, Mahindra Finance has minimal documentation requirements and approves loans quickly.