In India used-car financing is usually aimed at two things: buying a second-hand car or refinancing an existing vehicle or car loan. The first of these is the standard method, which involves taking a loan in order to purchase a used car.
However, refinancing has a different purpose and may be useful in certain cases. Let’s consider the situations in which selecting this option might be sensible.
Understanding the ‘loan against car’ structure
A used car refinance loan allows you to raise funds against a car you own, with the vehicle as collateral. If you replace an existing car loan with a new one offering better terms, like a lower interest rate, the transaction is treated as a car loan balance transfer.
Such financing may also be offered as a ‘loan against car’. Tenures vary across lenders instead of following a standard industry limit. For example, IDFC FIRST Bank offers a Loan Against Car refinance facility with flexible repayment tenures up to 84 months. The loan amount, interest rate, and tenure depend on factors like the vehicle’s age, condition, valuation, and the borrower’s credit profile.
Ideal scenarios for refinancing
There are a few situations where refinancing is the best possible course of action. Let us look at what these are.
- Unlocking high-value cash for personal or business use
Under a used car loan refinance, the bank pays off your previous loan, and the remaining sanctioned amount is provided to you. This strategy becomes ideal when you can avail a remaining balance of up to ₹50 Lakhs.
This balance consists of high-value funds. This is because, since your car is pledged as collateral, you can avail these funds at a significantly lower interest rate. You can use this liquid cash for business or personal expenses.
- Capitalising on high-LTV limits for maximum credit expansion
In a loan against car scheme, the LTV limits are far higher than new car loan schemes. This is because the limits are calculated on the vehicle’s current market value, which factors in market depreciation. Here, with IDFC FIRST Bank, you can access up to 200% LTV.
This way, you can leverage your expensive asset to extract cash far higher than its resale value. That said, it is important to maintain a strong credit profile, free of defaults, to obtain the highest possible LTV.
Benefits of IDFC FIRST Bank refinance loans
IDFC FIRST Bank’s loan against car scheme offers a plethora of benefits that make it an excellent financial product for your auto refinancing needs.
- Attractive interest rates
One of the most crucial components of this loan type is its significantly lower interest rates. This loan provides just that. IDFC FIRST Bank’s loan against car offers interest rates starting from just 13.99% p.a.
- Flexible repayment timelines
The scheme also provides longer and flexible repayment timelines to applicants. The available tenures range from 11 to 84 months. The tenure offered depends on the car at the time of application.
- Quick, online application approvals
Approval timelines under this scheme can be as short as 15 minutes. Furthermore, you can also receive payment within 24 hours.
Step-by-step refinancing application guide
The application process for IDFC FIRST Bank’s loan against car scheme is completely online.
- Log in to the IDFC FIRST Bank mobile banking or net banking
- Select the ‘loan against car’ option from the available loans list
- Fill the online application form and ensure your credentials are correctly entered
- Receive reply from the bank on your registered email ID.
Conclusion
A used car loan refinance scheme can be an excellent option, especially for the scenarios discussed above. That said, a strong credit profile is important to secure the best possible terms and conditions. Furthermore, it is equally important to have the car in an optimal condition. Lastly, it is essential to select the appropriate tenure and amount which you can estimate using a second hand car loan EMI calculator.