Owning a car is everyone’s delightful dream. With our banks offering their best plans and the car manufacturing companies coming up with cars of every kind, whether it’s for the luxury-loving gentry or for the common need of the people, it has indeed become easier to own one!
So how has it become possible to buy a car with so much ease?
Yes, the banks offer all kinds of loans to suit your needs, whether it’s a personal loan or a car loan.
Let’s see which loan should one consider while buying a car. Whether we should glance through the car loan mela leaflets, where dealers have a tie-up with banks for offering cash discount OR we should go through the procedures of personal loan which promises to give us the full amount that is needed.
1. Sanctioning of loan:
While we compare personal loan and car loan in terms of loan sanctioning, the ease that is reflected in vehicle loan is more than in personal loan. This owes to the fact that personal loan requires a lengthy process of documentation, which ultimately delays the process of loan sanctioning. Whereas, Car loans are easier to be sanctioned because the car dealers have a tie up and deal with the bank, and they assure you with the same, even when you are still planning to buy a car!
- Rate of interest:
A loan is offered to the loan seeker on the condition that he needs to repay the amount along with an interest, which varies according to the type of loan that has been taken. While looking at these two loans, we see that Personal loans demand a higher rate of interest, like 12%-20% per annum (this can vary from bank to bank) as compared to Car loans (9%-14% per annum, which varies from bank to bank). Although the interest rate for used cars loans is between 14%-20%, which is seemingly higher.
- Time period/Tenure:
While personal loan needs to be repaid to the bank with interest by 5 years, Car loans, on the other hand, have a longer tenure of about 8 years. This again gives an edge to the latter providing some comfort to the buyer.
- Amount/ Quantity of loan offered:
Here, the facts state that banks provide car loans between 50%-80% of the value of the car, which means that the consumer needs to pay the remaining amount from his pocket at that time. Stating an example, if the value of a car is Rs 10 lakh, and the bank offers 70% of the loan, which would amount to Rs 7 lakh, the remaining amount of Rs 3 lakh needs to be paid, to the car dealer at the time of the purchase, by the consumer himself. Whereas in the case of a personal loan, the consumer can get the full amount from the bank, once the documentation is done, and then this amount can be used to buy the car.
- Security / Collateral deposit:
While personal loan can easily be taken without providing any security/ collateral, Car loan has the car as the security for the loan provided. This means, that in case of defaulters who are unable to pay their car loans need to give their car to the bank which can sell it to recover the loan amount.
So, taking an overview of the above points, it ultimately depends on the consumer as to which loan suits him better.
For example, if he is not self-sufficient with funds at that point of time, and is ready to pay any amount of interest, then he could opt for a personal loan. Otherwise, if he has some amount of the down-payment, but is not at all interested in paying a high amount of interest, he could opt for a vehicle loan.