Purchase of car is almost as planning for house purchase. In case if a high-end car is to be purchased the investment shall be a huge one. Due to this reason, it is very important to plan for the same.
Financing of a car a new one is pretty easy in comparison to a used one. The second-hand car is purchased if the user does not have much usage and he is taking for comfort purpose or finances are a constraint. In the first cases, the amount can be either through a loan or outright payment. For sure in the later case, it is only through a loan. When a loan is to be taken first thought which comes is from whom to take, how much to take, the rate of interest how much is going to be charged, how am I going to repay the same. All individuals shall have these questions and many times there are few answers and in those also satisfactory answers are less.
Normally loan amounts sanctioned depend upon CIBIL score so people who have got not good score think of other loans which can be taken for purchase and one such easy way is to take personal loans.
Loan amount for pre-used cars depends upon age, type, running and car condition. The loan rates are also at a higher rate in comparison to new car loan rates. Further, the amount which is going to be given as loan is also not 100%. The amount is at the discretion of the lender. With this background, the loan taker has to decide if he wants a personal loan or a car loan. Both can suffice the requirement and they have their own pros & cons.
1. Personal Loans-
A conception in the loan market is getting a personal loan is very easy and it does not require any documents. But the problem which comes is the rate of interest. The rate is nearly 20 to 25%. By taking this we are increasing the cost by a heavy amount. Personal loans are unsecured loans and credit score will play a major role in the loan approval process and set the interest rate. The personal loan interest rates shall differ depending on tenure and CIBIL score. Being unsecured loan it has a problem if the amount is not payable on time.
2. Car loans-
These loans are secured loans. The lending rates vary from 15 to 23 % in banks and the lending amounts also vary from 75 to 85 % in case of used cars. This means if the if the price of the used car is Rs.4 lakh and the lender valued it at Rs.3 lakh, the used car loan can be availed up to Rs 2.4 lakh (80% of Rs 3 lakh).The differential amount of Rs.1.6 lakh, including down payment of Rs.60000, have to be borne by the purchaser.
3. Duration of Loan-
Loans normally given on second-hand cars are dependent on the condition of car, age and KM’s run. In many cases, the tenure is maximum 5 years. In case of
Personal loans also the period normally is 5 years.
In case a decision has to be made between personal & car loan it is almost in favor of car loan if credit score is less. Also from a security point of view car loans are safe. But if no amount of own is to be used by borrower then personal loans can be useful.
But in case no own amount is to be used then the cost of the car is going to be very high because of interest rates added to loan amounts. In any case, decision of borrower is final but pros and cons are to be weighed properly and loan availed.