Fight Against Coronavirus   1. Wash Your Hands Frequently   2. Maintain Social Distancing   3. Avoid Touching Eyes, Nose and Mouth   4. Practice Respiratory Hygiene   5. Stay Informed and Follow Advice given by Your Healthcare Provider   6. If You have Fever, Cough and Difficulty Breathing, seek Medical Care Early             Dial National Helpline Number +91-11-23978046 or 1075

3 Reasons Why Personal Loan for Used Car is a Better Option than Car Loan
By Anupama Deshpande | Feb 22, 2019

Owning a car is a dream of many persons. Some of them want to purchase a new car in case they afford it easily but some of them opt for buying a second-hand or used car. They come to a conclusion of buying a used car for many reasons such as lower cost, get the model they like in their budget, less insurance premium, can make rough use of the car, etc.

Buying a car is the second most expensive affair after buying a house. It requires huge amount of funds. Though there are many lenders to offer you a Car Loan so that you can buy it now but to repay the loan is a long term liability.

For buying any car, no matter it is new or old, banks offer you car loan. For providing car loan for used car, banks have set their own norms and conditions. In every situation, it is probably not possible for you to buy an old car through a car loan even though it is available at low interest rate. In such situations, you may consider buying a used car through Personal Loan as personal loan can be used for any purpose. Further, the process of applying for a personal loan is simple and disbursal is quick.


Suggested reading 5 Smart Ways to get Cheap Personal Loan

It is true that Car loan comes at a lower interest rate in comparison to a personal loan but in a car loan, you may not get the 100% finance from the lender for used car loans as the loan amount will be 70% to 90% of the car value and you need to bring your own contribution as well which is called "down payment". If you do not have any savings, making down payment can be a difficult task for you. In case of personal loan, you can get entire amount of cost of your car as loan. There is also an option that you can prepay your personal loan any time during the loan tenure whenever you have surplus funds available.

Following are the major 3 Reasons why personal loan for used car is better option than Car Loan:

(1) Banks Usually Offer Car Loan for Used Cars not older than 3 to 5 Years

Unlike new car loan, bank's approval of car loan in case of used cars is subject to the age, model and condition of the car. Moreover, interest rate on used car loans is also usually 3% to 5% higher than that of new car loans.

Interest Rate

You will face rejections of extending car loan from most of the financial institutions, when age of the car is old or when it has been already sold multiple times before. With buying used car with personal loan, there is no such point of worry.

Suggested reading Top 3 Reasons for Rejection of Personal Loan

(2) No Need for Hypothecation of Car

In case of used car bought through availing personal loan, the ownership of car will remains with you as a personal loan is a collateral free loan. There is no need of hypothecating your car with the lender.

(3) You can Sell Your Car Anytime

In case of used car bought through car loan, you can sell your car only when you have repaid entire amount of loan to the lender and made your car free from hypothecation.

In case of personal loan, you can sell your car anytime and without any boundation as you are the owner of the car and the car is under your own possession.

Our View

It is correct that car loan is available at comparatively lower interest rate than personal loan interest rate but in case you are facing problems in getting car loan to buy a used car due to any reason than you must know that you can buy a used car through personal loan. The major benefit in buying a used car through personal loan is you can sell it any time you want even without repaying the personal loan.

Suggested reading What Factors do the Lenders Check before Extending Personal Loans?

About Anupama Deshpande
Anupama is a Co-Founder of CodeForBanks.com. She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for CodeForBanks.com & important resource to all those around her.
ALL INDIA BANKS LIST
A B BANK LIMITED ABN AMRO Bank N V ABU DHABI COMMERCIAL BANK ALLAHABAD BANK
American Express Banking Corp ANDHRA BANK Antwerp Diamond Bank NV AU SMALL FINANCE BANK LIMITED
AXIS BANK B N P PARIBAS BANDHAN BANK LIMITED BANK OF AMERICA
BANK OF BAHARAIN AND KUWAIT BSC BANK OF BARODA BANK OF CEYLON BANK OF INDIA
BANK OF MAHARASHTRA BANK OF TOKYO MITSUBISHI LIMITED BARCLAYS BANK BHARATIYA MAHILA BANK LIMITED
Calyon Bank CANARA BANK CAPITAL SMALL FINANCE BANK LIMITED CATHOLIC SYRIAN BANK LIMITED
CENTRAL BANK OF INDIA CHINATRUST COMMERCIAL BANK LIMITED CITI BANK CITY UNION BANK LIMITED
CORPORATION BANK DBS Bank India Limited DCB BANK LIMITED DENA BANK
DEUSTCHE BANK DHANALAKSHMI BANK EQUITAS SMALL FINANCE BANK LIMITED ESAF SMALL FINANCE BANK LIMITED
EXPORT IMPORT BANK OF INDIA FEDERAL BANK FINCARE SMALL FINANCE BANK LTD HDFC BANK
HSBC BANK HSBC BANK OMAN SAOG ICICI BANK LIMITED IDBI BANK
IDFC First Bank INDIAN BANK INDIAN OVERSEAS BANK INDUSIND BANK
JAMMU AND KASHMIR BANK LIMITED JP MORGAN BANK JSC VTB BANK KARNATAKA BANK LIMITED
KARUR VYSYA BANK KOTAK MAHINDRA BANK LIMITED Krung Thai Bank Public Co. Ltd LAXMI VILAS BANK
MASHREQBANK PSC MIZUHO CORPORATE BANK LIMITED NORTH EAST SMALL FINANCE BANK LIMITED OMAN INTERNATIONAL BANK SAOG
ORIENTAL BANK OF COMMERCE PUNJAB AND SIND BANK PUNJAB NATIONAL BANK SBM BANK MAURITIUS LIMITED
SHINHAN BANK SOCIETE GENERALE SONALI BANK LTD SOUTH INDIAN BANK
STANDARD CHARTERED BANK STATE BANK OF BIKANER AND JAIPUR STATE BANK OF HYDERABAD STATE BANK OF INDIA
STATE BANK OF MYSORE STATE BANK OF PATIALA STATE BANK OF TRAVANCORE SURYODAY SMALL FINANCE BANK
SYNDICATE BANK TAMILNAD MERCANTILE BANK LIMITED THE BANK OF NOVA SCOTIA THE NAINITAL BANK LIMITED
UBS AG UCO Bank Ujjivan Small Finance Bank Limited UNION BANK OF INDIA
UNITED BANK OF INDIA UNITED OVERSEAS BANK LIMITED UTKARSH SMALL FINANCE BANK VIJAYA BANK
Woori Bank YES BANK ZILA SAHAKARI BANK LTD