Buying a car is an exciting milestone, but choosing the right financing option can be confusing. Two common choices are car loans and personal loans. Both can help you fund your purchase, but they work differently and impact your ownership costs.
At Vizzve, we make it easier to compare your options so you can make the smartest financial decision.
What Is a Car Loan?
A car loan is a secured loan offered specifically for purchasing a vehicle. The car itself serves as collateral.
Key Features of Car Loans:
Purpose-specific: Can only be used to buy a car.
Lower interest rates: Since it’s secured, rates are usually lower than personal loans.
Loan-to-value (LTV): Lenders finance up to 80–90% of the car’s on-road price.
Tenure: Typically ranges from 1–7 years.
Ownership condition: The lender has rights to the car until the loan is repaid.
What Is a Personal Loan?
A personal loan is an unsecured loan that can be used for any purpose, including buying a vehicle.
Key Features of Personal Loans:
Flexibility: Can be used for new or used cars, or even for related expenses like insurance.
Higher interest rates: Since it’s unsecured, rates are usually higher.
Loan amount: Depends on income, credit score, and repayment ability.
Tenure: Typically ranges from 1–5 years.
No collateral: You own the car outright from the start.
Car Loan vs. Personal Loan: Quick Comparison
| Feature | Car Loan | Personal Loan |
|---|---|---|
| Purpose | Only for buying a vehicle | Any purpose, including vehicle purchase |
| Interest Rates | Lower (secured) | Higher (unsecured) |
| Collateral | Vehicle itself | None |
| Loan-to-Value | 80–90% of car’s price | Based on eligibility |
| Flexibility | Limited | High |
| Ownership | Car hypothecated till loan repayment | Immediate ownership |
Which Option Should You Choose?
Choose a Car Loan If:
You want lower interest rates.
You are buying a new car directly from a dealer.
You don’t mind the car being hypothecated until repayment.
Choose a Personal Loan If:
You want flexibility in how you use funds.
You’re buying a used car.
You don’t want collateral tied to your loan.
How Vizzve Helps You Decide
At Vizzve, we simplify your decision-making by:
Comparing both car loan and personal loan offers from top lenders.
Showing total repayment costs side-by-side.
Providing instant eligibility checks and quick approvals.
Helping you calculate EMIs with our easy-to-use tools.
Bottom Line
Both car loans and personal loans can help you drive home your dream vehicle. The right choice depends on your financial goals, repayment capacity, and preference for flexibility or lower interest. With Vizzve, you can explore both options and choose the one that best fits your needs.
FAQs:
Q1. Which is cheaper: a car loan or a personal loan?
Car loans usually have lower interest rates since they are secured.
Q2. Can I use a personal loan to buy a second-hand car?
Yes, personal loans are flexible and can be used for both new and used vehicles.
Q3. Is down payment required in a car loan?
Yes, since most lenders finance only 80–90% of the car’s cost.
Q4. Can I prepay my loan early?
Yes, both loan types usually allow prepayment, though charges may apply.
Q5. How does Vizzve help me choose the right loan?
Vizzve compares multiple lenders and helps you pick the most cost-effective loan option.
Published on : 30th September
Published by : SMITA
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