Personal loan vs Second hand Car loan
Want to buy a Second Hand Car – Is Personal loan better option than Second Hand Car loan?
Getting a Used Car loan approved can be a difficult task sometimes. Banks while sanctioning the car loan would likely want to inspect and verify the car which may not be possible if car is still in current owner’s possession. Or maybe you haven’t decided on the car yet and are on the lookout for prospective sellers. But, you have an idea of the cost for the kind of vehicle you are searching for.
In such a case taking Personal loan for buying a used car may not be just the easy option but also may be the better one.
The interest rates associated with used car loans are higher. While one can have a new car loan with interest rates in the range of 10.5%-12%, the used car loans have higher interest rates starting from 14.25% and in some cases they can even go up to 18%. Personal loans on the other hand can have a wide range of Interest rates. Some banks can sanction personal loans to eligible good earning, salaried professionals with a good work-ex at 13% interest rate. Whereas, some NBFCs can charge an interest rate of as high as 30%.
Let’s put things into perspective here, If you are earning Rs 30,000 monthly, work in a reputed company and have a work experience of 2 years, then there are a number of banks who will be willing to give you a personal loan of up-to Rs. 4 lacs at 13%-14% interest rate.
On getting a quote for these details you’ll find the following Personal Loan Deals:
| Bank/NBFC | Loan Amount | Interest Rate | Tenure | EMI |
| HDFC Bank | 4,00,000 | 13% | 4 years | Rs. 11,268 |
| ICICI Bank | 4,00,000 | 13% | 4 years | Rs. 11,268 |
| Tata Capital | 4,00,000 | 13.99% | 4 years | Rs. 11,476 |
| Central Bank | 4,00,000 | 13.75% | 4 years | Rs. 11,425 |
| IDBI Bank | 4,00,000 | 14% | 4 years | Rs. 11,477 |
Whereas, for these details, you’ll find the following Used Car loan deals:
| Bank/NBFC | Loan Amount | Interest Rate | Tenure | EMI |
| HDFC Bank | 2,00,000 | 14.25% | 3 years | Rs. 6,779 |
| Axis Bank | 2,00,000 | 15% | 3 years | Rs. 6,847 |
| TVS Credit | 2,00,000 | 15% | 3 years | Rs. 6,847 |
These analysis, make a very good case for taking a personal loan for financing used car. In this case, you’ll be able to borrow more and that also at a cheaper interest rate.
However, keep in mind that interest rates may change as per your salary and work experience. If you are taking a personal loan for buying second hand car, check interest rates as per your eligibility. If interest rate on personal loan is coming out higher as compared to Used car loan, then there is no advantage in going for it.
