Eligibility Criteria for Used Car Loans: Banks vs NBFCs
Buying a second-hand car is a smart and affordable way to upgrade your lifestyle. But what if you don’t have the full amount to pay upfront? That’s where used car loans come in.
Both banks and Non-Banking Financial Companies (NBFCs) offer used car loans in India. However, the eligibility criteria, documentation process, and approval flexibility can vary significantly between the two.
In this blog, we break down the eligibility requirements of banks vs NBFCs so you can make an informed decision.
What Is a Used Car Loan?
A used car loan is a financing option that allows you to purchase a pre-owned car by borrowing a certain amount from a lender. You repay the loan in EMIs (Equated Monthly Instalments) over a specified tenure with interest.
Hence, you can apply for a used car loan to ease your financing for the purchase of a second hand car with a very simplified process.
Eligibility Criteria Comparison
| Criteria | Banks | NBFCs |
| Age | 21 to 60 years | 21 to 65 years |
| Employment | Salaried with stable income | Salaried, self-employed, small business owners |
| Income Requirement | ₹20,000/month and above (varies by city) | As low as ₹12,000–₹15,000/month (flexible) |
| Credit Score (CIBIL) | 700+ preferred | 600+ accepted; even low/no score considered |
| Loan Amount | Up to 80–85% of car’s value | Up to 90% of car’s value (Loan-to-Value ratio) |
| Car Age Limit | Car should be less than 5 years old | Car can be up to 10 years old |
| Documentation | Strict verification; formal income proof required | Flexible; alternative proofs like bank statements accepted |
| Approval Speed | Slower due to stricter checks | Faster disbursal with digital-first process |
Why Choose an NBFC Like Piramal Finance?
Piramal Finance is a leading NBFC that understands the needs of Bharat — India’s underbanked population across Tier 2, Tier 3 cities and rural areas.
Here’s what makes Piramal Finance ideal for used car loans:
- Easy eligibility, even for those without formal income documents
- Accepts low or no credit history
- Quick and paper-light approval process
- Covers personal, family-use and even commercial second-hand cars
- Strong presence in semi-urban and rural areas
What Documents Are Required?
Banks Usually Ask For:
- PAN Card, Aadhaar Card
- Salary slips or IT returns
- Bank statements (6–12 months)
- RC book & insurance papers of the car
NBFCs May Accept:
- Aadhaar + PAN + Voter ID
- Bank passbook or informal income proof (business invoices, self-declaration)
- Basic car documents like RC, pollution certificate
Let’s Understand This With an Example
Ramesh, a self-employed trader from a Tier 3 city, was rejected by two major banks due to his lack of salary slips and a credit score of 620.
He approached Piramal Finance, provided his Aadhaar, bank passbook, and details of the car. His loan was approved within 48 hours—and he now owns his first second-hand car.
Final Thoughts: Which One Should You Choose?
| If You Are… | Choose |
| A salaried person in a metro city with high credit score | Bank |
| Self-employed, informal income, or from a small town | NBFC (e.g., Piramal Finance) |
| Want quick approval with less paperwork | NBFC |
| Looking for lower interest rates and have strong documentation | Bank |
