Get the Tata Capital App to apply for Loans & manage your account. Download Now


Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required

Tata Capital > Blog > Loan for Vehicle > A Used Car Loan or Personal Loan for a Car, Which One is Better for You?

Loan for Vehicle

A Used Car Loan or Personal Loan for a Car, Which One is Better for You?

A Used Car Loan or Personal Loan for a Car, Which One is Better for You?

The pre-owned or used car market in India has been growing in double digits. A lot of people are opting for used cars rather than buying a new one due to constrained budget, or just for the sake of refining their driving skills before buying a new car.

Are you also planning to buy a pre-owned car and are confused between a used car loan or a personal loan? Here are the things that you need to consider before you decide:

Focus on the Interest Rates

A large chunk of your EMI goes in paying the interest on the loan. Therefore, you should take a loan which offers you the lowest interest rate. Usually, the interest rates for personal loans range from 11% to 24% while for used car loans, it is between 14% - 18%. However, a lot depends on your CIBIL score, employment, age and income. If these are on the right track, the bank can offer you lower interest rates.

Loan Amount

If you opt for a used car loan, lenders evaluate your car and offer you a loan amount based on this value. This ranges from 70 to 90% of the valuation amount. For example, if your car is worth Rs. 7 lakhs and the lender values it at Rs. 6 lakhs, then the lender will value your car between 70 to 90% of Rs. 6 lakhs, which ranges between Rs. 4,20,000 to Rs. 5,40,000. The rest of the amount will be your down payment. The advantage of a personal loan is that you can use the entire loan amount and also skip the valuation process.


Tenure plays a major role in getting a used car loan. Usually, you won’t get a loan for a pre-owned vehicle that’s beyond 5 years. The older the vehicle, the shorter will be the tenure of your loan, which means higher EMIs per month but faster repayment of the principal amount. However, if you opt for a personal loan, you will get a tenure of up to 5 years to repay the loan. That’s regardless of the car’s age or condition. The longer the tenure, the higher the interest rate. 

Your Credit Score

Have a poor credit score? A used car loan can really come to the rescue. That’s because a personal loan is an unsecured loan, therefore it is only handed out to people with a reliable credit score and income. Used car loans are secured, that’s why even if you have a poor credit score, you can still get a quicker loan approval and drive that car you’ve been waiting for.

Quicker Loans for a Fast Moving World

Here again, the tides are in favour of personal loan as you can get it processed within 1 to 5 days. The process for used car loan is more tedious and longer as it involves more paperwork. That’s because the lender has to check all the car documents and also go through a thorough examination and valuation of the car. This process usually takes a week or more to disburse.

It All Comes Down to(Conclusion):

If you have a good credit score then a personal loan might be better since you will get a better interest rate, lesser documentation and quicker processing of your loan. If you are struggling with your credit score then a used car loan is a better strategy as it comes with collateral security of your car, has a shorter tenure and lesser repayment of interest in the long-term.

Why Tata Capital?

Be it a personal loan or used car loan, Tata Capital offers you both options with the lowest interest rate and the quickest disbursal of your loan.