There are all sorts of financing options available in the market today that can help you achieve your dreams and desires. The challenge is to identify the ones that you are eligible to avail and of those the one that is the most economical for you.
Car manufacturers offer various models priced differently. This makes it easier for you to own a car. Furthermore, the easy availability of car loans has increased in the number of four-wheelers on the road.
When you are choosing a financing option, you have the choice of a personal or a car loan. Both these options have their pros and cons. Before you make your decision, understanding more about these options is beneficial.
Personal Loan vs. Car Loan
To understand how to compare the two financing options and decide the right product below is a comparison between a car and personal loan.
- Ease of sanction
A car loan is easily available primarily because most car dealers tie-up with lenders to offer finance. The documents required are minimal and you may complete the entire procedure within a couple of days. In comparison, approval of a personal credit facility primarily depends on your credit history and score. Furthermore, the documentation required in much more and the processing time is longer.
- Interest rates
The interest rates on new car loans range between 11.50% and 13.5%. In comparison, the personal credit interest rates are between 10.99% and 17.99%. The applicable rate of interest in a personal credit facility depends on your income and credit score. Therefore, if your score is high, you may be eligible for a lower rate of interest.
- Repayment period
The car loan tenure may be between one and seven years. On the other hand, personal loans must be repaid within five years from the date of availing the facility.
- Loan amount
Lenders sanction up to 90% of the value of the car. The balance must be paid through your own resources before the lender disburses the loan amount. Based on your eligibility, personal credit may be available up to an amount of INR 15 lakh. Therefore, if you are looking for an expensive car, motor finance may be your only option.
When you avail of a car loan, your vehicle is mortgaged with the lender. On the other hand, personal credit is an unsecured loan and you do not have to mortgage your assets to avail the money.
The decision on which option to choose depends on your personal choice and situation. If you have the down-payment available and do not have a low credit score, a car loan may be more suitable. However, if you do not want to mortgage your vehicle and enjoy higher credit score, a personal facility may be more appropriate.