Do I need vehicle insurance to get a used car loan?

Having valid vehicle insurance is a requirement to secure a used car loan in the country. Lenders will expect you to provide proof that a car is insured before they will release the loan for your used car purchase. The standard requirements for insurance would mean that you and your lender are both protected in the event of theft, accidents, damage and more. The insurance should be registered for a minimum of basic third party liability, however most lenders will usually advocate for more comprehensive insurance. If the vehicle you are purchasing does not have insurance arranged already, you will need to take out an insurance policy prior to loan authorisation. Some lenders may allow a loan amount that includes the amount for the insurance, allowing the buyer to do this without needing separate funds for car insurance. Always check what is expected for insurance directly with your lender, and make sure the entire term of the insurance policy is active for the entire loan term.

Many lenders will need you to take out and maintain maintenance insurance. Not just third party cover as this covers both your interests, and theirs from accidental damage, theft or natural disasters. Some lenders may also encourage or insist on GAP insurance. This provides protection for the difference between your remaining loan and the car's depreciated value in the event of a total loss (theft or written off due to damage). Make sure you get a copy of your insurance policy to review and ensure the lender's name is specified. Your insurance policy should be active and up to date for the term of your loan.