Should You Get A Personal Loan To Buy A Second-Hand Car
Sometimes it’s hard to get approved for a loan for a car. It may be challenging to get a car loan if the existing owner is still in possession of the vehicle because banks typically want to inspect and verify the vehicle before approving the loan. Or perhaps you’re still in the market for a car but haven’t made up your mind. You know how much you’ll need to spend on the vehicle you want.
Getting a personal loan to go towards the down payment on a used automobile may be the most convenient and best choice.
Once you’ve settled on purchasing a new or pre-owned vehicle, the next big question will likely be what financing you should apply for. You can get a personal loan or a loan for a car from a financial institution to pay for it. Select the loan that meets your needs in terms of convenience, affordability, and flexible credit requirements. Given these criteria, which of the two loans remains consistent? Continue reading to find out the same thing.
Considerations while taking a personal loan
Rate of Interest: It determines the overall cost of the loan to the lender. Rates for unsecured personal loans typically range from 11% to 24% annually.
Loan Amount: Personal loans can be funded up to the whole deal amount for those who qualify. Depending on the terms of your agreement with the seller, the total cost of the transaction could be the car’s current market value or some other amount.
Credit Score: When you apply for a personal loan, the lender will check your credit history. A unique loan application is more likely to be denied if your credit score exceeds 700. A higher interest rate is expected in the event your loan is accepted. However, the requirements for a good credit score may be less stringent when getting a loan for a used car.
Loan Disbursal: Faster disbursement is possible for personal loans instead of used cars. Banks often fund borrowers’ accounts for unsecured loans within two to four days. However, personal loans that have already been accepted can typically be distributed within hours of approval. Alternatively, a used car loan could take up to a week to process. Your chosen lender also affects the time it takes for your loan to be disbursed.
Documentation Process: The paperwork process while opting for a personal loan for a car is amazingly seamless as compared to a used car loan. You can get a personal loan by submitting your KYC documents, while it may take a few more documents to get a used car loan.
Loan Term: Most lenders allow for repayment over a maximum of five years; however, some go as high as seven. So, when you apply for a personal loan to pay for a used car, you can choose a loan term based on your ability to make the monthly payments, no matter how old or in good shape the car is.
Quick Approval: Because personal loans are unsecured, getting approved for one is much simpler and faster than getting a car loan. Purchasing a used vehicle from a disorganised operator in the pre-owned auto market might add unnecessary complexity to the loan application process. The application procedure, approval time, and loan disbursement will all be quick and easy.
Low-Interest Rates: Personal loans are available from several public-sector institutions at lower interest rates. However, the ultimate personal loan interest rates made available to candidates mainly depend on their credit rating, monthly income, employment status (if employed), and other factors.
| Banks | Interest Rates (p.a.) |
| Personal Loan | |
| SBI | 10.30% -15.10% |
| Axis Bank | 10.75% onwards |
| HDFC Bank | 11.00% onwards |
| ICICI Bank | 10.75% onwards |
| Bank of Baroda | 10.20% – 17.55% |
Documentation Needed
Personal loans will require very little paperwork; the most significant part is that you don’t have to send or upload anything to us. The whole authentication procedure can be completed in a web browser. To apply for a used car personal loan, you’ll need the following items:
- Completed and submitted the application form.
- Passport-size photo.
- Documentation proving one’s identity, such as a driver’s license, passport, or official government ID card.
- Documentation of residence, such as an Aadhaar card, voter card, passport, driver’s license, etc.
- Documentation of the monthly paycheck.
Personal Loan For Car
At first, a personal loan might seem better than a loan for a used car. But if you have a low credit score, your chances of getting a personal loan are much lower.
The application process for a personal loan is straightforward and focused on the customer’s needs. Also, the personal loan EMI calculator helps you better organise your budget after you’ve used the eligibility calculator to determine that you qualify for a loan.
Conclusion
Both personal loans and loans for cars have their pros and cons. Personal loans are an option if you want to borrow a larger sum at a reduced interest rate. This may also be effective if you want to buy a car from a friend or if the car is really old and thus doesn’t have particularly favourable interest rates for a used car loan. At Piramal Finance, we are always there to help you if you need help with personal loans while buying a car.