A dream car purchase is a major financial decision you must make with great consideration. Therefore, selecting the appropriate financing option is essential so that you do not get yourself into a heavier financial burden. While car loans are specifically designed for vehicle purchases, personal loans can also be used as an alternative.
Understanding personal loan for buying a car
A personal loan is a lump sum amount that can be used for a number of purposes, like a car, an unsecured loan. Personal loans are not secured on the vehicle so you have more flexibility in how the loan can be used. However, you must note that personal loans carry higher interest rates.
Subodh Kumar, General Manager-Retail Asset Division, Punjab National Bank, said: “A personal loan can indeed be used to purchase a car, as lenders typically do not require verification of the loan’s end use. This flexibility allows borrowers to allocate the funds according to their specific needs, including vehicle purchases. However, borrowers often prefer vehicle loans for purchasing vehicles, as personal loans generally come with higher interest rates and are therefore more expensive.”
In conclusion, you must understand that personal loans attract higher interest rates with shorter tenures. Even a single missed payment can affect your credit score because of which you might not be able to get future loans at low interest rates. Hence, make sure that you thoroughly plan your repayment journey before you apply for the loan.
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