Used Car Loan: With the prices of new cars rising, many people are now choosing second-hand or pre-owned cars.
To meet this growing demand, banks and NBFCs are offering used car loans, making it easier to buy an old car even if you don’t have the full amount. These loans are great for those looking for budget-friendly car options.
Loan Amount & Interest Rate
Banks usually finance 80% to 100% of the car’s value. The loan tenure ranges from 1 to 5 years, and some lenders offer up to 7 years.
Interest rates start at 9% and can go up to 17–18%, depending on the bank, the car’s condition, and your credit score.
Who Can Apply?
To apply, you must:
Be 21 to 65 years old
Have a stable income (salaried or self-employed)
Have a credit score above 700 for better interest rates
Usually have 2–3 years of work experience
Required Documents
To apply for a used car loan, you need:
ID proof: Aadhaar, PAN, Passport, or Voter ID
Income proof: Salary slip, bank statement, or ITR
Vehicle documents: RC book, insurance papers, and pollution certificate
Used Car Loan vs Personal Loan
Planning to take a personal loan instead? Here’s a quick comparison:
A used car loan is secured, where the car is the collateral
A personal loan is unsecured, with no asset backing
Interest rates on personal loans are higher (10%–24%)
Personal loans require no down payment and are easier to process, but cost more overall
Top Banks Offering Used Car Loans
| Bank/NBFC | Interest Rate (p.a.) | Tenure |
|---|---|---|
| Punjab National Bank | Starting from 9.40% | 5 years |
| Axis Bank | 13.55% – 15.80% | 5 years |
| Mahindra Finance | Contact the bank | 5 years |
| State Bank of India | 11.75% – 15.25% | 5 years |
| HDFC Bank | From 13.75% (Rack Interest) | 7 years |
| Kotak Mahindra Bank | Contact the bank | 5 years |
| ICICI Bank | Starting from 11.25% | 7 years |
| Karur Vysya Bank | Starting from 11.45% | 7 years |
| Federal Bank | Starting from 12.00% | 7 years |
| Tata Capital | Starting from 10.75% | 5 years |
Things to Consider Before Applying
Compare interest rates, processing fees, and loan terms
Evaluate the car’s age, condition, and value
Understand the documentation and approval process
Check for hidden charges, late fees, and prepayment penalties
If you’re planning to buy a used car at a lower cost, a used car loan can be a convenient and affordable option.
With proper planning and the right documents, you can get approved quickly and drive home your car with ease.
