Whether you are out to buy a car or just curious, have you ever wondered about differences between a Car Loan and a Personal Loan? When you read about Personal Loan, they usually claim to be “for any purpose”. So why does one need a car loan?
What Are The Main Differences?
|Car Loan||Personal Loan|
|Restrictions||Must be spent on car purchase||For any reason (incl. buying a car)|
|Security/Collateral Required||Secured against your car||Secured or Unsecured|
|Credit Rating||Medium/Bad Credit will suffice||Usually required good credit|
|Buying new or used car||Mostly for new cars||Mostly for used cars|
|Amount borrowed||Covers only the car value||Borrow any amount|
|Interests Rates||More competitive (car as security)||Tend to be higher|
Where can you get a Vehicle Finance vs. Personal Loan?
You can get both Vehicle Loan and Personal Loan from any financial institution like banks or other lenders. In addition to that, Vehicle Finance are also offered by car dealerships. So you can directly finance your car from the dealership you but it from.
How much can you borrow for a car?
In most cases, you can borrow up to 100% of the value of your car as part of your auto finance. Since your car will be used as a security for your loan, deposit is not required. However, it is always a good idea to have 20% deposit, if your financial situation allows for it.
So now that you know the basics, how do you choose?
The answer depends on your personal and financial situation.
- If you are purchasing a secondhand car, it will usually be cheaper. However, it is better to get a personal loan to fund a secondhand car, because lenders may not want to fund an older car.
- If you have bad credit, you are more likely to get approved for a car loan because technically you do not fully own your car until the final payment. So, if you default on your payments, the lender can repossess your car to recover any leftover debt.
- If you are planning to do any enhancements or modifications on the car, a personal loan may cover the cost of the vehicle as well as the modifications, compared to a car loan.
What’s the bottom line?
Buying a car (or anything for that matter) is stressful enough. So, leave the sorting out of the finances to the experts. At cash.com.au we have a team of expert brokers that will guide you through the minefield of borrowing and will find you the best solution to suit your individual requirement.
Applying for a loan with cash.com.au is also simple, 100% online and FREE, so Apply Now and being in the experts.