How Should You Take a Personal Loan To Buy A Car?

Taking a call on a big purchase is always tough. But you should not worry about the payment when you have many loan options. The best of all is a personal loan. Personal loans are versatile; they serve many purposes, including buying your dream car.

Research shows that there has been an increase in the number of personal loan applications in India over the last few years. It is easy to see why borrowers prefer personal loans: they require no collateral and have lower interest rates.

A personal loan for a car is preferred over a car loan in India. A car loan typically only covers 80% of the total cost of the vehicle. A personal loan, on the other hand, covers the entire cost of the car.

What Is a Personal Loan?

A personal loan is a sum of money that you can borrow and spend on many things that are for your personal use. For instance, you may use it to pay off your debt or use the personal loan amount for a car.

Features of a Personal Loan

1. Unrestricted use of loan amount
2. Minimal paperwork and formalities
3. Quick loan approval
4. Fast loan disbursal
5. Flexible tenure for EMIs
6. No need for collateral

Types of Personal Loans

1. Secured LoansA secured personal loan comes with collateral. e.g., an asset like a deposit account, home, or car. The collateral is used as security by the lenders. They have the right to keep the collateral as payment if you default on the loan. 
2. Unsecured LoansMost personal loans are unsecured. There is no need for any collateral to get such a loan. Because of the absence of collateral, banks view unsecured loans as risky. So, the interest rate on an unsecured personal loan is higher.

Can I use a personal loan to buy a car?

Generally, there is a misconception that you can only use a personal loan for certain expenses. Examples include home renovations, emergency expenses to repay debt, vacations, and so on.

But in reality, you can use a personal loan for a car instead of taking out a car loan. Personal loans have a quick funding process and involve a simple application process.

Personal Loans vs. Car Loans

	Personal loan for a car	Car Loan
Loan Type	Unsecured Loan.There is no need for collateral.	Secured Loan.The car is used as collateral security.
Purpose	Can be used for many purposes.	Can only be used to buy a car.
Credit Score	The better your credit score, the more you can borrow.	There is no need for a credit score.
Interest Rates	A higher credit score means a lower interest rate.	It is determined by the amount of the car loan.

 

Benefits of Getting a Personal Loan for a Car

• With a personal loan for a car, you have the option to borrow any amount you want. It is not restricted to the cost of the car. This helps you apply for part of the car’s value or the full amount, whichever is feasible for you. 
• You can select a loan tenure of your choice. This means that you can repay your personal loan for a car according to the convenience of your budget. 
• You can avail yourself of a personal loan with a low-interest rate by
  • keeping your credit score high
  • maintaining a strong repayment record.
  • keeping no outstanding debt
  • comparing the interest rates of different lenders 
• You can have complete ownership of your car, unlike with a car loan.

How to Take Out a Personal Loan for a Car

You can take a personal loan for a car with these steps below:

1. First, you have to compare the annual rates offered by different lenders. This includes the interest rate and all other fees. This helps you find the best annual percentage rate.
2. Then, calculate your credit score to know how much you can borrow as a personal loan for a car. The higher your credit score, the more you can borrow.
3. Next, check if the monthly repayment amount and the total amount you will end up paying the lender to fall within your budget.
4. Finally, calculate the type of interest rate: fixed or variable.
5. Now that you can plan your finances according to the loan, approach the best financial lender.

Eligibility

Details	For salaried applicants	For self-employed applicants
Age Limit	18-60 years	21-65 years
Minimum Income (which may vary across lenders)	Rs 15,000 per month	Rs 15 lacs per annum
Work Experience/Business Continuity	1 year (at least 6 months with current employer)	2 years of business continuity
Credit Score	750 or higher

Documents for a Personal Loan for a Car

1. PAN Card 
2. Identity Proof (any one of the following)PassportDriving LicenseAadhaar CardVoter’s Identity Card 
3. Address Proof (any one of the following)Registered Leave and Lease AgreementPassportDriving LicenseAadhaar Card/Aadhar AcknowledgementVoter’s Identity CardUtility bills like telephone bills, electricity bills, etc. (not more than 3 months old) 
4. Income Proof 
5. Last month’s salary slip 
6. Bank Statements from the Last Three Months

Adding a Co-Applicant

• To qualify for a higher loan amount, you need to combine your income with that of a co-applicant.
• Only your spouse can become a co-applicant.
• You need to submit all the above documents for the co-applicant too.

Conclusion

Buying a car is no longer a mere dream. With a personal loan, you can turn this dream into reality. But you should always analyse your finances before you get a personal loan for a car. Compare the annual rates, EMIs, and loan terms offered by various lenders. Also, keep your credit score high and have no history of default payments.

If you are eligible for a personal loan, then what are you waiting for? Prepare your documents and submit them as soon as possible. Take advantage of your loan and enjoy car rides with your loved ones.

To avail of a personal loan for a car quickly or for any queries related to it, talk to the financial experts at Primal Finance. While there, also check out their other products, services, and articles related to such topics.