Reasons to Take a Small Personal Loan when Buying a Car

Today, owning a car has become very common for most people. Depending on one's income level, it can be both an essential commodity and a class symbol. Having your own vehicle is also seen as a mark of financial stability – it means that you're earning enough to afford a car. The convenience factor also can't be missed. With your own vehicle, you can travel anywhere at your own convenience without depending on anybody. Thanks to India's young population and rising income levels, India's automobile industry's growth isn't stopping soon. Today, there are cars priced for every income bracket, whether within ₹3 Lakhs or above ₹20 Lakhs. If you want to buy a car, how you're going to finance it also matters. Your lender will only finance up to 80% of your car's cost with a car loan. You'll have to pay the remaining 20% by yourself. If you don't have adequate funds, you can avail of a small personal loan as well. Here are three reasons why a small personal loan is a better choice than a car loan while purchasing a vehicle:

1.Collateral

This is one factor where a small personal loan has a clear advantage over a car loan. With a personal loan, there's no collateral involved. So, if you default on your loan payments, your lender cannot seize any of your assets, as such. However, in the case of a car loan, your lender will promptly seize your car if you default on the loan. The vehicle you will purchase will be the collateral in this case. The disadvantage here is that if you've taken out a car loan, you'll never truly own your car until you've paid your loan in full. This is not the case if you get a small personal loan.

2.Down Payment

As mentioned earlier, if you opt for a car loan, you can only fund 80% of the car's on-road cost. If the car's on-road price is, say, ₹9 Lakhs, you will secure a car loan for only ₹7.20 Lakhs. You'll l have to make the remaining payment (₹1.80 Lakhs) as a down payment. This can be an obstacle towards getting your own vehicle if you don't have such an amount readily available in your bank account. However, with a personal loan, you can fund the entire cost in one shot without worrying about a down payment.

3.Ease of Access

Today, thanks to banks, non-banking financial companies (NBFCs) and a host of Fintech lenders, the process of availing both a car loan and a personal loan is much more comfortable. You can avail either option online, by either visiting your bank's website (if they offer car loans as well) or a loan aggregator website. Based on the availability of the loan amount, the interest rate, and loan terms, you can select a lender that meets all your requirements.

However, you also need to take the loan disbursal time into account. A bank still needs to ascertain your loan eligibility and validate your documents, before approving the car loan. The loan will then take time to reach your bank account. In total, you'll need at least two days. However, with a personal loan, you can avail one within as little as 15 minutes to a couple of hours. How? Through a small loan app! The entire application process happens on your phone, in the app, and you receive your loan directly in your bank account. Of course, all your documentation needs to be in place, just like a car loan.

4.Purpose of the Loan

This is another factor that highlights the convenience a personal loan has to offer. If you take out a car loan, you can only use the funds to purchase the car, and for no other purpose. However, there is no such restriction in terms of using the loan amount for a personal loan. You can use a personal loan to buy the car you want, but if you have funds remaining, you can use that to meet other urgent expenses as well.

In Conclusion

The points mentioned above are a few reasons you might want to consider taking out a small personal loan while purchasing a car. However, make sure that you scour the internet for the most suitable personal loan provider (or loan app, if that suits you) before deciding anything. It will help if you lessen your total interest pay-out as much as possible. This, in turn, depends on your loan principal, interest rate, loan tenure, and monthly EMI, which should be as affordable as possible. If you're looking for a trustworthy platform that provides quick access to small personal loans, you can always trust KreditBee. It is India's leading online loan app that offers instant loans. To get more information on how you can avail of a personal loan, email us at [email protected], and we will take it from there.