Are you considering buying a car and aren’t sure if you should opt for a car loan or a personal loan?
Read ahead to know the various features of a personal loan and a car loan that can help you better to make the right decision.
A personal loan is an unsecured loan where there is no barrier to the usage of the funds. You can use a personal loan for anything that you want.
The amount of loan you can get depends on your creditworthiness, your employment stability, and your debt-to-income ratio. Apart from banks, there are many instant personal loan apps that give out loans at attractive interest rates with minimal documentation.
Now that you know ‘what is personal loan’, let’s look at some personal loan features.
Unsecured loans, i.e. no need to pledge a collateral
Short tenure
Amounts can vary between Rs.5,000 to Rs.40 Lakh
Available from various lenders like online lenders, banks, and NBFCs
Simple documentation
Higher interest rates in comparison to a secured loan
Can be used for any purpose
A car is a basic necessity for any family or person, but purchasing it with your savings can burn a hole in your pocket.
This is where car loans or vehicle loans come in. You can easily get car loans at low interest rates from banks or NBFCs to buy your dream vehicle.
You can get car loans for both new and second-hand vehicles. It is easier to procure a car loan for a new vehicle as compared to a second-hand one. Even interest rates are lower for the former and you can get up to 100% of the car’s price as a loan.
After reading about what is a car loan, let us take a look at some distinguishing car loan features.
The following are the major features of a car loan -
Can be availed only for the purchase of a car
A secured loan, where the vehicle purchased acts as the collateral
Ownership of the car remains with the lender till full repayment of the loan
The amount of the loan may go up to 100% if a new car is purchased
The amount may be limited to 80-90% of the cost of the car in case of a second-hand vehicle
Tenures can go up to 7 years, depending on the price of the vehicle
Can be availed with a lower credit score as it is a secured loan
Available from banks and NBFCs
Higher documentation needs as compared to a personal loan
Even though car loans are easily available, you can use funds from a personal loan to purchase a car. A personal loan undoubtedly comes with a lot of benefits but is it the best option of financing a car? Let’s take a look!
A personal loan doesn’t require a downpayment. So, if you want to purchase a second-hand vehicle without making a downpayment, you can opt for a personal loan for the total amount.
With a personal loan, there are no conditions for hypothecating the vehicle with the lender or submitting proof of purchase. This ensures that you get ownership of the vehicle from the first day.
This helps avoid the hassles of removal of hypothecation at the end of the loan period in the case of a car loan. It might also be helpful in case of a sale of the vehicle. Apart from this, if you default on your EMI, you will not have to lose possession of your vehicle.
A personal loan does not need extensive documentation. All you need to submit are proof of address, identity, and income. With the popular online lenders, nowadays, you can finish the application process within minutes and get the funds within 24 hours.
Car loans mostly come with longer tenures, whereas personal loans can have tenures as short as 3 months. If you want to get done with your loan faster, a personal loan might be a better choice for purchasing a car.
Now that you know that there are some benefits of choosing to buy a car using a personal loan, let us look at the pros of a car loan. This will give you a better idea and you can choose between a ‘personal loan vs car loan’ for your vehicle.
Personal loans are unsecured in nature, hence can be restrictive when it comes to the amount. However, a car could cost anywhere between a few lakhs to a few crores depending upon the model you choose.
Car loans are not restricted by the amount, hence may prove useful especially when you are looking at a high-value car.
As car loans are secured loans, they are less riskier for the lender. So when you compare the interest rate of ‘personal loan vs car loan’, car loans come at a lower rate of interest. This might help in reducing the financial burden on you.
Car loans are secured loans, hence these loans can be availed on a lower credit score. On the other hand, the credit score requirement for personal loans is generally high.
Car loans can be availed for a longer period of time, as compared to personal loans. Car loans allow extended tenures for 7-8 years, and if you want to pay your EMIs easily with a lesser burden, this might be a better option for you.
As discussed earlier, you can use the funds from a personal loan for any purpose. You can opt for instant personal loans from moneyview from the comfort of your home. Some of the important features of the loan that makes it the best choice for the purchase of a car are -
You can check your eligibility on the moneyview website in just 2 minutes.
From documentation to verification, the entire loan process happens online and is 100% paperless.
You can get a loan with a CIBIL or Experian score of just 650.
Our interest rates are one of the most pocket-friendly ones starting at 1.33% per month.
Once you have submitted the application and signed the agreement, the loan amount gets disbursed in your bank account within 24 hours, in most cases.
If you wanted to know ‘is a car loan secured or unsecured’, you must have understood that car loans are secured loans, unlike personal loans. However, the car that you take the loan for acts as the collateral for the loan, and you don’t have to arrange for separate collateral.
This makes car loans more affordable. But personal loans can be procured much more easily with minimal documentation.
The comparison of ‘personal loan vs car loan’, in the end, is very subjective. Each comes with its own set of advantages and disadvantages. Thus, the final decision depends on your needs and financial commitments.
Both personal loans and car loans come with their own pros and cons. Whether you should take a personal loan to buy a car depends on your unique needs and requirements.
No, they are not the same. A personal loan is an unsecured loan that you can use for any purpose. A car loan is a secured loan that can be used only to purchase a car.
The major disadvantages of a car loan are the longer tenures and the limitations on the usage of the funds. The documentation requirement is also more in the case of car loans.
A personal loan is better as you can use the funds for any purpose you want - you can also divide the funds procured into two or three projects. Apart from this, personal loans require minimal documentation and are very easy to get.
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