If you are planning to buy a car, car loans and personal loans are two of the most common financing options. However, one can avail both, if you meet their respective lending requirements. Before availing any one of them, you should be aware of the differences between them and choose the best one that matches your requirement.
Compare these factors between both the loan options to make a smart choice-
Rate of Interest and the loan amount offered –Car loan being the secured, the rate of interest offered are cheaper making it a suitable option for car buyers. The best part is one can avail a car loan easily despite having a low credit rating. On the other hand, personal loans lack collateral, the rate of interest charged are higher than that of car loans.
In the case of car loans, the maximum loan that you can avail depends upon the certain factors such as price of the car and the type of car that you intend to purchase i.e. new car or pre-owned car.
While in personal loans, the maximum loan amount depends upon the credit profile of the borrower and certain other factors such as your net monthly income.
Purpose of availing the loan – It is to be noted that a car loan cannot be used to purchase anything else other than the car using the borrowed amount. However, on the other hand, one can use the personal loan amount to buy the car and can be spent on any other expenses you desire.
Tenure of the loan – The tenure for both the types of loans are very different. The tenure for car loans is 7 years. While for personal loans, it ranges between 1 year and 5 years
Ownership of the vehicle – As car loans are secured, the ownership of the vehicle will be transferred to you immediately after the completion of the loan tenure. This benefit along with the lack of down-payment makes it an interesting option to consider. On the other hand, if you are choosing personal loans to purchase a car that are unsecured, you will get the ownership of the vehicle only after you pay off the loan amount in full to your lender.
Procedure for availing car loans and personal loans – Generally, it is much easier to get your car loan approved than a personal loan because of the presence of a collateral. Despite having a low credit score, one can easily file a car loan application online at Fintech’s portal or at bank’s official website. However, if you want to apply for an online personal loan easily, you can get that as well if you have a good credit history.
Deciding between the two financing options comes down to weighing the pros and cons considering your individual circumstances. Explore every aspect of both the loans and choose the most reliable one for yourself.