When planning to buy a car, choosing the right loan is crucial. Should you opt for a car loan or a personal loan? Both financing options have their pros and cons, and the choice depends on your financial situation.
At Bravima Solution, we provide easy NBFC-backed loans to help you make the right decision. In this article, we’ll compare personal loans vs. car loans in detail.
What is a Personal Loan?
A personal loan is an unsecured loan provided by banks and NBFCs for various purposes. It does not require collateral, making it a flexible financing option.
Key Features of Personal Loan:
- Loan Amount: ₹50,000 to ₹50 lakh
- Tenure: 1 to 7 years
- Interest Rate: 10.5% – 24% p.a.
- Usage: Can be used for any financial need, including buying a car.
Best for: Those who want flexibility in spending without restrictions.
What is a Car Loan?
A car loan is a secured loan specifically designed for purchasing a car. The vehicle itself acts as collateral, and failure to repay can lead to repossession.
Key Features of Car Loan:
- Loan Amount: Up to 100% of the car’s value
- Tenure: 1 to 7 years
- Interest Rate: 7% – 12% p.a.
- Usage: Exclusively for purchasing a car
Best for: Those who want lower interest rates and structured repayment options.
Personal Loan vs. Car Loan: Key Differences
| Criteria | Personal Loan | Car Loan |
|---|---|---|
| Loan Type | Unsecured | Secured |
| Collateral Required | No | Yes (Car acts as collateral) |
| Interest Rate | 10.5% – 24% p.a. | 7% – 12% p.a. |
| Loan Amount | ₹50,000 – ₹50 lakh | Up to 100% of car value |
| Repayment Tenure | 1 – 7 years | 1 – 7 years |
| Approval Speed | Faster | Slower (more paperwork) |
| Usage Flexibility | Can be used for any purpose | Only for car purchase |
Pros and Cons of Personal Loan vs. Car Loan
Pros of Personal Loan
- No Collateral Required – No risk of losing your car.
- Quick Approval – Less paperwork, faster processing.
- Flexible Usage – Funds can be used for anything.
Cons of Personal Loan
- Higher Interest Rates – Compared to car loans.
- Strict Credit Requirements – Requires a good credit score.
Pros of Car Loan
- Lower Interest Rates – Due to collateral security.
- Higher Loan Amount – Can cover the entire cost of the car.
- Longer Repayment Period – Up to 7 years for better affordability.
Cons of Car Loan
- Collateral Required – The car serves as security.
- Limited Usage – Funds can only be used for the car purchase.
Which Loan Should You Choose?
✔ Choose a Personal Loan if:
- You want flexibility in using the funds.
- You are buying a used car (as some banks don’t offer car loans for used cars).
- You don’t want to use your car as collateral.
✔ Choose a Car Loan if:
- You want a lower interest rate.
- You need a higher loan amount.
- You are comfortable using the car as security.
Eligibility Criteria for Personal and Car Loans
| Criteria | Personal Loan | Car Loan |
|---|---|---|
| Age | 21 – 60 years | 21 – 65 years |
| Minimum Salary | ₹20,000 per month | ₹15,000 per month |
| Credit Score | 700+ recommended | 650+ recommended |
| Employment | Salaried or self-employed | Salaried or self-employed |
| Required Documents | KYC, income proof, bank statement | KYC, income proof, car quotation |
How to Apply for a Personal or Car Loan?
Steps for Personal Loan:
- Visit the lender’s website or Bravima Solution for offers.
- Check eligibility and loan amount.
- Fill out the online application form.
- Upload required documents.
- Get loan approval and disbursement within 24-48 hours.
Steps for Car Loan:
- Choose the car you want to purchase.
- Get a quotation from the dealer.
- Apply for a car loan with a bank or NBFC.
- Submit required KYC and income documents.
- Loan is approved, and the bank pays the dealer directly.
FAQs – Personal Loan vs. Car Loan
1. Can I use a personal loan to buy a car?
Yes, a personal loan can be used to buy a car, but the interest rate will be higher than a car loan.
2. Which loan has a lower interest rate?
A car loan has a lower interest rate as it is secured with the vehicle as collateral.
3. What happens if I don’t repay a personal loan or car loan?
- Personal Loan: Defaulting affects your credit score, and legal action may be taken.
- Car Loan: The lender can seize your vehicle if EMIs are not paid.
4. Can I prepay my personal loan or car loan?
Yes, but prepayment charges may apply depending on the loan agreement.
5. Can I get a car loan for a second-hand car?
Some banks provide used car loans, but eligibility criteria vary.
Conclusion
Both personal loans and car loans have their unique advantages. If you prefer flexibility, a personal loan is a great choice. However, if you want a lower interest rate and higher loan amount, a car loan is ideal.
At Bravima Solution, we assist you in choosing the best loan option with NBFC-backed financing. Apply today and get expert loan guidance!
Contact us now to get started!
