What is the difference between a personal loan and a car loan?

2 min read

Personal loans are versatile, collateral-free loans, and you can use the funds as you deem fit. On the other hand, a car loan or a used car loan is specifically for purchasing a new or second-hand car.

Keep reading to know more about how the two loans differ.

 

Car loan

Personal loan

Type of loan

A secured loan, with the car serving as collateral.

Unsecured loan.

Loan amount

Depends on the value of the car.

Top lenders like Bajaj Finserv offer up to Rs. 25 lakh. The sanction you get depends on your eligibility and repayment abilities.

Funds usage

Only for a car purchase.

No restrictions on end-use. It can be used for planned or unplanned, professional or personal expenses.

Documents required

In addition to KYC documents, salary slips and bank statements, you have to submit paperwork pertaining to ownership of the car.

Only KYC documents, employee ID, salary slips and bank statements are needed.

Interest rate

The interest rate and loan charges depend on the lender and other factors.

Reputed financial institutions like Bajaj Finserv levy affordable personal loan interest rates and have nominal loan charges.

While you can assess your unique requirements and pick an option that best suits your needs, remember that a personal loan offers incredible ease of use and flexibility without collateral.

You can fulfil basic personal loan eligibility criteria and use funds from a personal loan to purchase a car. Additionally, a large sanction means that you can use the balance for other needs or urgent expenses, should you need to.

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