When you’re looking to buy a car, used or new, a Personal Loan or Car Loan serve the same purpose. Sometimes the lines can get a blurry. That’s where you need help.
The first thing you need to know if you are opting for a Personal Loan, is that personal loans in general, have stringent lending requirements. You need to have a good credit score. No co-signers are required. You won’t need to pledge any collateral as well.
But they will look for credit score. Usual required CIBIL scre for Personal Loan in 750 to 900.
Personal loans have a long tenure. They can cover the entire amount for a car. In general, 5 years are given to pay off a loan. This is regardless of the car’s age, make, model and condition.
When it comes to Car Loans, there are few things that you should know about.
First, your credit score doesn’t matter if you’re planning on going for a Car Loan. The reason for this is because the car is deemed as collateral. In the event you fail to make EMI payments on time and default, your bank can seize the car as collateral. You won’t be handed legal ownership until you clear your dues.
You also don’t get paid for the entire expense of the car. Most banks usually pay between 70%-90% of the car’s valuation. The remainder amount is what you have to pay from your own pocket. This is considered as a form of down-payment, unlike Personal Loans, where you get the whole amount.
Should I Get a Personal Loan or Car Loan?
Whether you want a Personal Loan for buying car or if you’re thinking about getting a Car Loan, there’s also the interest rate to consider.
Car loans generally have interest rates that’s pretty similar to that of Personal Loans.
The tenure of Car Loans is also taken into consideration depending on the age of the car. The tenure limit is up to a maximum of 10 years for used car loans. For Personal Loans, that reduces down to 5 years.
For example, if the car you buy is used and is 7 years old from the date of manufacture, you have 3 years to repay your EMIs if you get a used car loan.
Also Read: Buy a car Using Personal Loan
On the other hand, if you take a personal loan instead, the tenure for your EMI goes up to 5 years, since the date of manufacture doesn’t factor into this. So, you get more time to pay. You also get funded for 100% of the car’s cost. This is different from Car Loans, where you can only get 70% to 90% of the original value. These are some of the biggest differences when you’re thinking about Personal Loans vs. Car Loans.