If you are planning to buy a car, you will be looking for a loan to fund the purchase. Car loans are the most preferable financing option. However, you can even cover the cost of your car by taking a personal loan. So, you may be thinking that which of these funding alternatives to opt for. Let us first understand the difference between a personal loan and a car loan before we come to any conclusion.
A personal loan is a type of finance, which a financial institution (lender) provides to the borrower in the form of a lump-sum to meet any financial shortfall. You can take a persona loan for various purposes, such as financing a wedding in the family, going for an international trip with your loved ones, renovating your home, or buying a car. Here, there is no limitation on how to use the money. As such a loan is unsecured, you need not mortgage any valuable asset. However, such finance comes at a high-interest rate. Additionally, you need to consider the tenure while applying for a personal loan.
A car loan is a type of secured loan that you take from a financial institution to buy your dream vehicle. Here, the vehicle that you will be purchasing will be kept as collateral with the financial institution. If you are unable to repay the car finance, the lender will seize your vehicle to recover their dues. You will need to repay the loan in Equated Monthly Installments (EMIs) throughout its duration. A car loan comes at an affordable interest rate. Here, the risk of debt is substantially low because you mortgage the vehicle with the lender.
Which one is a better option?
It is advisable to opt for a car loan online if you wish to buy a car. It is a much more convenient option than a personal loan. Moreover, it is an economical funding choice, as financial institutions offer much lower interest rates for car loans viz-a-viz unsecured personal loans. The only benefit of a personal loan is that you have the liberty to use the funds to meet any of your financial emergencies or needs. So, weigh your options carefully before selecting either of the loan options.
As you have got an idea that a car loan scores over a personal loan, you can avail of funding from a reputed lender. Mahindra Finance offers attractive interest rates and diverse repayment options. You can determine the EMI with the car loan EMI calculator on its website. Moreover, check details related to the car loan eligibility over there.