Personal Loans vs. Pre-Owned Car Loans: A Comparative Overview

 

The Indian pre-owned car market is growing as more and more people are considering purchasing pre-owned cars. Easy availability, attractive pricing, and reliable pre-owned car market are some of the reasons, which have made used cars a viable option. The growth of the used-car market has given a boost to the pre-owned car financing market as well. 
While today there are specialized pre-owned car loans available for this purpose, many people still end up financing their second-hand cars with general financial options like personal loans. In the table below, we have compared the features of a personal loan with a pre-owned car loan for you to get a better understanding of the differences between the two financial tools.

Personal Loans vs. Pre-Owned Car Loans

Why Pre-Owned Car Loan is the best option to purchase a second-hand car?

Now that you have a basic understanding of the two kinds of loans that can be availed for purchasing a pre-owned car. Which do think is the better option? This is our answer definitely Pre-Owned Car Loans. Here’s are some more reasons to convince you of the same - 

1. Credit Score: 
   The terms and conditions of a personal loan are generally dependent upon the credit history and score of the applicant as this type of loan is predominantly an unsecured loan. However, as used car loans are secured by the assets purchased, the applicant receives better options with auto financing.
2. Funds Requirement: 
   If you are able to provide a minimum 20% of the total car value from your side, then taking out a used car loan may be a more viable option. Pre-owned car loans are generally limited to 70% to 80% of the car valuation, requiring the applicant to come up with an alternative for funding the gap. In the case of personal loan, you may finance the entire car purchase. However, as pre-owned car loans provide better terms and conditions, it is advisable to go for such specialized financing and fund the gap with some alternative arrangement.

   3. Loan Approval Process: 
If you require the cash to be disbursed in the shortest time possible, then a personal loan is the way to go for financing your car purchase. However, as pre-owned car loans generally have better terms and conditions, it may be worth your while to wait for a couple of days. You can also considerably reduce the turnaround time for your used car loan by providing correct and adequate documentation, making it a more viable option than taking out a personal loan.
 4. Interest Rate: 
While interest rates for personal loans may vary between 11% and 25%, the applicable rate for pre-owned car loan hover between 9% and 18% per annum, making the latter option a better deal. In order to keep your overall costs low, it is advisable to avail used car loan financing for purchasing your vehicle. 

Many a times, the used car buyers simply pick a dealer-financed car loan due to the ease of access. However, it makes sense to explore other options such as personal loans or arranging finance from other financial institutions. Such specialized pre-owned car loans provide some very distinct advantages, making them a superior option for financing a second-hand car purchase. With these loans, not only you can keep your overall financing costs lower, but also can make the entire process faster and smoother.