When it comes to buying a car of your own, one of the most economically efficient options is to avail a loan to help along with the purchase. However, with the wide variety of loan products in the market, it becomes essential to decide which type of loan would be best suited for your requirements.
The two most popular types of loans for purchasing a new car are Personal Loans and Car Loans. On one hand, Personal Loans are a type of unsecured loans provided to the borrower to fulfill a variety of financial requirements. On the other hand, Car Loans are a type of loan that is provided to a borrower specifically to fulfill the requirement of purchasing a car. With Car Loans, also known as Auto loans, the lender typically provides a loan amount that covers up to 80% of the price of the car, while the remaining has to be paid out by the borrower himself.
So, which one should you choose? Here are the primary differences between a Personal Loan vs Car Loan:
In terms of loan amounts, as mentioned above, Car Loans typically only provide an amount that is equal to up to 80% of the cost of the car you wish to purchase. The rest of the cost, which is 20%, will be expected to be paid by you, the borrower. On the other hand, with a Personal Loan for a car, you can avail an amount that covers the entire cost of the car and make the purchase right away without filling any financial gaps.
There is also the matter of interest rates to consider between Personal Loan vs auto loan. Typically, the interest rates for Personal Loans for cars are much higher than other forms of loans, including Car Loans. However, it is important to remember that the interest rate offered to you by the lender depends greatly on your credit score and credit history. With the right interest rate, you can purchase the car of your choice and eventually pay off the loan amount in no time.
The two types of loans being discussed, that is Personal Loan and Car Loan, are distinguished by the purpose for which they can be availed.
On one hand, the only purpose for which a Car Loan can be availed from a lender is to purchase a car. The entire loan amount disbursed by the lender must be utilized to make the purchase of the vehicle.
On the other hand, a Personal Loan for car can be availed not only to purchase a car but also meet any number of financial purposes. Therefore, if you wish to avail a loan to fulfill more than the car purchase, a Personal Loan might be the right way to go.
Another factor that plays an important part in marking a difference between a Personal Loan vs a Car Loan is the tenure, or repayment period of the loans.
A Personal Loan for car can be availed for a period as short as 1 year and comes with tenure options of up to 5 years. On the other hand, Car Loans typically have tenure options ranging between a minimum of 3 years and a maximum of 8 years.
Both of these tenure options offer their own sets of benefits. The shorter tenure of the Personal Loan means that you will end up paying much lower in interest than you would with a longer tenure like with the Car Loan. However, this also means that your EMI payments will end up being much higher for a shorter tenure than they would when spread out over a longer tenure.
When comparing Personal Loan vs auto loan, we must also consider the matter of ownership of the purchased car itself.
Car Loans are typically a form of secured loans. This means that you will only be able to gain ownership of the car after you have made all your loan payments and the tenure is complete. However, Personal Loans are unsecured loans. Hence, as soon as you utilize your Personal Loan amount to purchase the car, you will immediately gain its ownership. You will also be able to avoid having to pay a down payment for the purchase of the car.
The discussion of Personal Loan vs Car Loan is also important in the matter of which one is easier to avail than the other.
In terms of ease of availing the loan, Car Loans are typically easier to avail since they are secured and therefore require security or collateral from your end. On the other hand, Personal Loans are unsecured which offers their own benefits, but usually require borrowers to have a decent credit score. Having said that, the process of availing Personal Loans for car can be incredibly easy for loan applicants with good credit scores. They can even get the opportunity to enjoy lower interest rates than most applicants.
Overall, the procedure of availing both Car Loans as well as Personal Loans has become much more convenient in recent times. Not only do these loan products offer various useful features and benefits but they can also be easily applied for and availed - entirely online. The final decision between choosing a Car Loan vs a Personal Loan for your car ultimately comes down to all the factors mentioned above.
If you are looking for the perfect Personal Loan to finance your car purchase or other financial requirements, look no further than the Personal Loans available on the Finserv MARKETS platform. With loan offerings of up to Rs. 25 Lakhs, flexible repayment tenures, and a convenient application and approval process, the Personal Loans available on Finserv MARKETS might just be the right option for you.
A Personal Loan is designed to be used to fulfill a number of financial requirements as the borrower sees fit. Therefore, it does not have an effect on a Car Loan.
Both types of loans tend to have their own share of pros and cons. It is important to go through the details of both types of loans and compare them definitively before making the choice that best suits your financial requirements.
Yes, you can get a Car Loan even if you have a Personal Loan. Personal Loans do not typically come with any restrictions on what other loans can be availed alongside it. However, make sure that your loan payments are on time in order to maintain a good credit score.