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Do You Know How to Pick Between a Personal Loan and a Used Car Loan? Here is a Guide

· car finance,car loan,used car loan

Due to economic slowdown, the new vehicles market in India has experienced a major setback. But surprisingly, the market for pre-owned cars is growing continuously. Studies show where 3.6 million units of new cars were sold in the 2018-19 fiscal year, the selling and buying units of second-hand cars were 4 million.

Here, a major factor is affordability – You can avail a pre-owned car loans or a personal loan to purchase a used car. But, the used car loan amount depends on the condition of the vehicle. Contrarily, personal loan provides you unrestricted access while purchasing a second-hand car.

Here is a list why you should opt for a personal loan to own a used car –

  • Affordable interest rate

Interest rates of personal loans for used cars are more affordable than pre-owned car loans. Moreover, the state of the vehicle determines the interest rate of a second-hand car loan. So, if the condition of the car doesn’t match with the lender's criteria, interest rates will be higher.

  • High loan amount

You can avail a personal loan of up to Rs.25 lakh, whereas a second hand car loan amount can only be 70-90% of the car’s value. Therefore, with personal loans, you don’t have to make a down-payment.

  • Flexible tenors

Even though tenors of both the loans are the same, with a used car loan, age of the vehicle decides the loan repayment tenor. That means, the actual repayment tenor becomes smaller and the EMIs become higher.

  • Simple eligibility criteria

Personal loan eligibility criteria are mostly similar to the eligibility criteria of a used car loan. They both require a high CIBIL score and steady income. Unlike a personal loan, second-hand car loans will be approved only within a certain age of the car.

To sum it up, even though you can avail a pre-owned car loan easily as it is a secured loan, a personal loan is a better option considering the above factors. Moreover, NBFCs provide personal loans with easy and hassle-free procedures too.

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