Getting your own car is almost like a celebration of your transition into adulthood. Cars are costly, but there are several benefits of owning a car. Once you’ve decided to buy a car, the next step is to arrange the funds. After making the down payment towards the purchase, one can choose to avail loan to arrange the remaining amount to purchase the car. People are still cautious about their purchasing habits as we slowly fade away from the dark times of the pandemic. With car loans and personal loans easily available, owning a car has become even more possible. Now the real question is which of the two is the better choice. Keep the following points in mind as you choose the best way to finance your car-buying ambitions.
|Factors||Personal Loans||Car Loans|
|Collateral||A personal loan is an unsecured loan given to a borrower by the banks to meet their financial requirements. You need not pledge any collateral while availing personal loan and the amount of the personal loan sanctioned will be determined by multiple criteria, including the applicant’s income, job history details, and credit history*.
(*The sanction is made as per the terms and conditions of the bank lending the amount)
|Auto loans are secured loans and the vehicle bought by availing the loan is hypothecated to the bank/lender. This usually implies that if you do not make the required (re)payments, the lender has the right to confiscate the vehicle and take necessary action as per their policies to recover the loan amount.|
|Interest Rates||Because personal loans do not require collateral, their interest rates are usually higher compared to car loans.||Many banks and financial institutions are now offering Car loans at competitive interest rates. Since the vehicle is also hypothecated to the bank, the interest rate for car loans are lower when compared to Personal loan.|
|Loan Amount||In case of personal loans, you can borrow the whole amount required to purchase the car since the loan amount can be utilized for multiple purposes (but to avail the entire loan amount, the applicant must satisfy all the criteria set by the lender bank).||Banks usually lend upto 75% -85% of the total cost of the Car. The remaining amount should be paid by the applicant as the down payment. One of the popular banks, Karnataka Bank offers up to 85% on-road price for Car loans(other terms and conditions may be applied subject to the bank’s policies).|
|Loan Tenure||A personal loan has a repayment period of one to five years.||A car loan has a repayment period of three to seven years.|
|Loan Approval||Most of the leading banks now offer Personal Loan in digital mode. Through this, one can avail personal loan in a hassle-free manner within quick time, from the comfort of their home.||Most of the auto dealers have a tie-up with banks for the sanctioning of the loans. Due to this, the car loans get faster approvals if proceeded with the banks recommended by the auto dealers. However, one can always visit their home branch and evaluate various options through offline and online research before making a decision.|
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When deciding between a personal loan and a car loan to finance your vehicle purchase, focus on aspects such as loan tenure, total amount, EMI, as well as the interest rate etc factors. Personal loans might be an excellent alternative if you need funds in a short notice of time. However, car loans become a better option if you can’t afford large EMI payments and want to stretch the repayment over a slightly longer period of time. Before making your choice, see which option of the two is best according to your repayment capacity and loan requirements.
Personal loans and car loans have become easier to obtain in the past few years. With the advent of online banking, one can get a fast car loan or an instant personal loan with absolute ease. You can even get an easy online car loan or personal loan in just a few taps. Many banks offer attractive offers on Car loans during the festive seasons. One of such bank is Karnataka Bank- offering Car Loans with attractive interest rates and quick sanctions through their “KBL Utsav” campaign.
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