The benefits of owning a car bestows upon the owner are too good to be ignored. But like with most big-ticket purchases, purchasing a new car is a financial commitment which requires substantial funds. If you do not have the adequate funds in your hand, you can consider availing of a loan. , taking an auto loan or a Personal Loan.
For Personal Loan allows you to use funds as per your needs.
Understand Car Loans first
While most lenders offer up to 80% of the value of the car, you may find offers up to 100% financing. The repayment tenor varies between 3 years to 7 years. To avail of a Car Loan, you are required to visit the branch of the lender as online applications are not supported. With the rising popularity of Personal Loans, you might be conflicted between choosing a Car Loan or a Personal Loan for buying your new car.
Is using a Personal Loan for a car purchase a right decision?
The maximum amount available as a Personal Loan can go up to Rs. 40 Lakhs, while there is no such limit applicable on Car Loans. Many lenders are even offering up to 100% financing of the car value as the loan amount. While the money availed as a Car Loan can only be used to purchase a car, Personal Loans can be used for financing any financial requirements of yours, including a new car, its accessories, and others.
The maximum repayment period for Personal Loans can extend up to 6 years, and for Car Loans, it can go up to a maximum of 7 years. You can, therefore, choose a repayment tenor, which offers you an affordable EMI. Though, to avail of a Car Loan, some lenders require the borrowers to pay up to 20% margin money before disbursing the loan amount. As such, Personal Loans are very handy while buying a car as you can easily pay for the margin money as well as other associated expenses.
The hypothecation is removed only after the entire loan amount has been repaid. But Personal Loans are unsecured, and there is no need to offer any collateral. Thus, there is no fear of losing collateral with a Personal Loan, whereas in the case of a Car Loan, non-payment can lead to the sale of the car. Once you repay the entire loan amount and get NOC from the lender, you will become the true owner of the car.
But this is not the case when you purchase your car with a Personal Loan. You will be the owner of the car right from the day you purchase it. In case of Personal Loans, the risk involved is greater for the lenders, and they follow the proper process to satisfy their queries, which can sometimes take up to a week and requires several documents. The decision to choose between a Car Loan or a Personal Loan depends totally on your preferences.
If you want better flexibility and do not mind paying higher interest rates, then a Personal Loan is a better choice, but if you want a lower EMI and higher loan amount, then a Car Loan will suit your requirements.