Car Loan vs. Personal Loan: Which Is the Better Option for Buying a Car?

Never think of taking a personal loan to finance your car. Because I am sure you will regret it later. Personal loans are difficult to get. Personal loan interests are high, usually because banks know you need money, so they take some advantage of your situation.

Personal loans have higher interest than car loans. When it comes to car loans the interest rate ranges between 8.5% to around 14% and in the case of personal loans, the interest rates can easily go up to 20% and sometimes even higher.

So you should go for a car loan as it is easier to get. The repayment of a car loan will also be longer and the burden on your shoulders will be much less.

I would look at private banks or banks that have a strategic goal of expanding their customer base. These banks often have promotional offers where you may be able to get a car loan at a lower interest rate. I would say try any private bank like HDFC Bank or other private banks.

Is a car loan a good option?

This answer is based on my personal experience and I think car loans are a good option. If you have to choose between banks for car loans, I would look at private banks or banks like HDFC that have a strategic goal of expanding their customer base. Such banks often have promotional offers where you may be able to get a better deal on a car loan.

Cars are very expensive and buying them at once is not easy for everyone. So, the loan helps the person to buy the car, and then he can repay the loan in monthly installments which is easier on the pocket than a large amount disappearing in one shot.

Usually, car loans have a tenure of three to five years, but some banks may offer loans for up to seven years as well. A loan for a longer tenure may mean smaller equated monthly installments (EMIs), which makes the vehicle seem more affordable, but overall, you end up paying more in the form of interest. It is important to note that a car is a depreciating asset, so taking a loan for a longer tenure may not be the best thing to do.

If you have some savings that are earning 7 to 8% interest in fixed deposits, you can consider using them instead of taking a loan. On the other hand, it is a good idea to keep those fixed deposits for emergencies and take a car loan and pay the installments from your regular earnings…financial discipline is also good.