Planning to buy a car but confused between taking a car loan or a personal loan? Both options can help you finance your dream car, but they work differently in terms of interest rates, documentation, and flexibility. Let’s explore which loan type suits you best.
What is a Car Loan?
A car loan is a secured loan where the vehicle you buy serves as collateral. The loan is specifically sanctioned for car purchase, and repayment is made in monthly EMIs. You cannot use this loan for any other purpose.
What is a Personal Loan?
A personal loan is an unsecured loan — which means no collateral is required. You can use it for multiple purposes including buying a car, home renovation, or travel. However, the interest rate is usually higher than that of a car loan.
Key Differences Between Car Loan and Personal Loan
| Feature | Car Loan | Personal Loan |
|---|---|---|
| Type | Secured (vehicle as collateral) | Unsecured (no collateral) |
| Interest Rate | Lower (starts around 8.5% p.a.) | Higher (starts around 10.5% p.a.) |
| Usage | Only for car purchase | Can be used for any purpose |
| Tenure | Up to 7 years | Up to 5 years |
| Ownership | Car remains hypothecated to lender until full repayment | Car ownership remains fully yours |
When to Choose a Car Loan
- - You’re buying a new car and need 80–90% financing
- - You want a lower interest rate with longer tenure
- - You’re comfortable with the car being hypothecated until repayment
When to Choose a Personal Loan
- - You’re buying a used car or want flexibility in spending
- - You have a strong credit profile and want quick approval
- - You don’t want to pledge your car as security
Example: EMI Comparison
Let’s compare both using an EMI example. Suppose you borrow ₹8,00,000 for 5 years:
- - Car Loan @ 8.5% p.a. → Approx. EMI = ₹16,400/month
- - Personal Loan @ 11.5% p.a. → Approx. EMI = ₹17,650/month
You can use our EMI Calculator to find your exact monthly payments for both types of loans.
Benefits of Applying via Shah Communication
- - Compare multiple car and personal loan offers instantly
- - Access lowest interest rates from top banks and NBFCs
- - Use free tools like Loan Calculator and eligibility checker
- - 100% online process with expert support
Still unsure which option is right for you? Visit Shah Communication to compare, calculate, and apply for the best car loan or personal loan that suits your budget and needs.
Disclaimer: The information in this article is for general understanding only. Loan eligibility, rates, and terms may vary by lender.