Should I Use a Personal Loan to Make A Car Down Payment?
Personal Loans are great for financing vacations and weddings. But have you ever wondered, 'Can I use a Personal Loan to buy a car?' The answer is, ‘Yes, you can!' In this article, we look at the benefits of Personal Loan over a car loan in India.
Lenders do not ask you to show what you do with the money. So, you could easily take a Personal Loan to buy a new car. But the pertinent question is this:
Car finance versus Personal Loan
Car loans are plentiful in India. But some factors can make it hard for you to get a car loan.
Low salary: Lenders will study your income before issuing the loan. Suppose you want to buy the Skoda Superb, the prices for which start from Rs.24 lakh. But you earn a yearly income of Rs.3 lakh. A lower salary could be a hindrance in getting approval for the car loan.
Cap on loan amount: Now, car loans do not cover the entire price of the car. They have a cap at 75% to 95% of the showroom price of the car. So, even if you get a car loan, a percentage of the price will come from your own pocket. This extra amount could feel like an unnecessary drain on your finances.
Need for collateral: Some lenders ask for security or collateral for loans above Rs.10 lakh. If you do not have any assets that would work as collateral, it will be hard to get loan approval.
A Personal Loan is a better bet in each of these respects. You can get Personal Loans for as much as Rs.50 lakh. This would cover the full cost of your new set of wheels.
Besides, you do not need to provide collateral and security for Personal Loans. You just need to fulfil the other eligibility criteria. Then your loan amount can be as high as you want. Here are some criteria that the lender might prioritise:
- A good CIBIL score
- Steady income
- Work history (whether you switch jobs or work in a risky sector)
In fact, you can even use your Personal Loan to buy a used car. Used car loans typically have higher interest rates ranging from 13% to 20%. But if you have a good credit score, you could bargain for a lower rate. Most lenders—whether Axis Bank, Mahindra Finance, or Bajaj Finserv—may be willing to negotiate on the interest rate.
A Personal Loan to buy a car
Getting a Personal Loan to buy a car requires very little documentation. If you already have a relationship with the lending institution, things are even faster. You may get the loan in as little as 72 hours.
Most lenders today provide an online application option for Personal Loans. In fact, Bajaj Finserv promises to approve loan applications within five minutes. So, there is no need to wait for weeks to have your loan approved. Just use a Personal Loan for the down payment on your brand new vehicle.