In today's world, cars are more of a necessity than just a luxury. This is because in many major cities, many people have to travel long distances to work and back, and the unreliable public transport system doesn't help.
So yes, you can avail of a personal loan to buy a car. Most car loans usually offer only about 80% of the vehicle's market value, and you have to arrange the rest for yourself. Personal loans can come in handy in such situations.
Choosing between a personal loan and a car loan
There are many factors to consider while choosing between a car loan and a personal loan, including:
Car loans are secured loans, with the car being purchased as the collateral. Thus, if you are unable to repay your car loan, your car can be taken away by the lender. On the other hand, personal loans are unsecured loans and do not require collateral. This also means that your car won't be taken away.
Interest rate and loan amount
Car loans usually offer only up to 80% of the car's on-road cost, while personal loans can give you up to 100% of the cost as a loan amount. However, since personal loans are unsecured, the interest rate will be slightly on the higher side than that for a car loan, which is a secured loan.
Your credit score
Your credit score is another factor that plays an important role while choosing between these two loans. If your credit score is good, you can easily get a personal loan at a reasonable interest rate, and that might be the better option for you. However, if your credit score is poor, your personal loan interest rate is likely to be relatively higher, and a car loan might be the better choice.
A car loan can only be used for purchasing a car. Meanwhile, an instant personal loan can be used to get other related gadgets and accessories or for any other purpose as well.
Ease of availing
Both these types of loans are available online and therefore easy to avail. Bajaj Finserv makes the application process even easier thanks to the pre-approved offers on loan products and other financial services. Simply fill in a few basic details to get your pre-approved offer.
The tenor for personal loans is short, ranging from 12 to 60 months, while that for car loans is longer, ranging from 36 to 96 months. A longer tenor means smaller EMIs but a larger interest payout, while shorter tenors mean higher EMIs but a smaller interest payout.
Thus, choosing between the two depends largely on your current income and repayment ability. Be sure to budget and plan a clear repayment strategy before applying for your loan.
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