have so many options of getting a loan for your new car. This means that you are confused with various quick and easy services that the bank will offer you.
You might be in a hurry of getting your car ASAP. But before you just sign any agreement with the bank, you must compare the best options you have in this situation.
There are many options of applying for these loans. The banks will have a lot of offers such as a personal loan or a car loan. Let’s talk about these options and check which is the best option for us to go ahead with, wherein you don’t have to pay any unnecessary interest to the bank.
As we all know a personal loan can be spent on anything, with no restrictions on how to spend the funds whatsoever.
The personal loan is normally of two types; one is the secured loan in which the borrower has to put a collateral against his loan. This may be as a house; fixed deposit or gold. The banks usually offer loans very quickly in such a scenario.
The lender has a right of seizing your collateral if you are unable to pay off the loan outstanding, even if the remaining outstanding is less than the collateral. In which case the outstanding is taken by the bank and remaining is paid back to the beneficiary. In terms of house and gold, it is first converted into cash and then settled. The benefit of getting a secured loan is that interest rate is lower as compared to the unsecured loan.
In an unsecured loan, there is no collateral involved, thus the risk to the lender is high. The rate of interest is very high in this situation. The lender has nothing to recover the amount if in case you are unable to pay, Hence they keep a high rate of interest.
The interest rate on a personal loan depends on your credit score as well. Longer the tenure of the loan, lower the monthly amount of the EMIs, but you will be paying a lot of interest in this case. Also, there is no Tax exemption on a personal loan either.
Car Loan, on the other hand, is only to buy a car; the lender will directly pay your car dealer, in order to fulfill your bill payments with the car dealer. You can then take the car once the manufacturer has delivered it. In terms of a car loan, the rate of interests are much lower than a personal loan. Because the car bought will play the role of the collateral. Hence if you are not able to pay off the loan, the lender will sell the car and recover his amount.
A car loan can be obtained on a normal credit history also, as this loan is technically rated as a secured loan. The banks have no issues to lend a loan for a vehicle as they know they can easily seize the car and recover their amount.
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