Corporate Banking

Top Benefits of Using a Personal Loan for Financing Your Car

Whether you intend to purchase a car or not, it’s easy to get tempted into doing it with all the car loan advertisements you see on TV and other social networking sites like Facebook, Twitter, Instagram, etc. 

However, not many people know that they can also use personal loans to finance the purchase of a new or used car. 

Schemes like the Alex Bank – car loan financing scheme make the process of buying your dream car easy. Before choosing a bank or loan scheme, compare the interest rates, associated costs, and other aspects of the different car loan options.

Loan Amount

With a good credit score, the banks can only offer a car loan amount of up to 80% of the price of the car. You will have to find measures to procure the remaining 20% by yourself. Even then, car loans come with interest rates ranging from 8 to 18%. 

However, certain digital banks can provide you with personal loans as high as $30000, with interest rates as low as 4.99%, provided you have a solid credit history and a high credit score.  

Collateral Requirements

Car loans are secured loans. It means that your car becomes the collateral object post-purchase. In the rare unfortunate event that you miss a few instalments, the lender will have the authority to seize your car until you clear the dues. 

This risk can cause a significant transportation crisis for you that may lead to further delays in the repayment of loans. A personal loan does not pose this risk, and the bank cannot seize your car under similar circumstances.  

Purpose of the Loan

A car loan is exclusive to purchasing a car, and it only covers up a portion of the cost of the car. This limits you from customising your car or adding the required accessories that enhance your automobile experience. 

You will find opting for a personal loan more convenient than a car loan as you can obtain loan amounts that will help you cover all the additional costs that are exclusive to you. 

Make a detailed assessment of all costs you plan to incur on the car before applying for the loan. It is recommended you discuss with car repair experts to know how much money you will pay.

Leverage A Sound Credit Score

If you have a good credit history, your credit score will also be good. Personal loans are a great way to use your sound credit score and even work as a method to improve them. You will also have to submit legal documents to prove you are not bankrupt. 

A sound credit score helps you in procuring a considerable loan amount at lower interest rates. You can use this to your advantage while purchasing a car. Regular and timely repayments of your personal loan will also help you in boosting your credit score.

Pre-Approved Personal Loans

Getting a car loan can be a tedious task and will require a lot of documentation before fruition. Besides ID proof documents and residency documents, you may also have to submit income statements

However, if you are a regular bank customer with a sound credit score, the bank will notify you about pre-approved personal loans. You can use the loan amount whenever you need it without any delay or documentation as they are pre-approved. 

Loan Tenure

Tenure is the duration provided to you to repay the loan amount. The longer the period, the lower the EMI. However, when the tenure is long, the interest rates increase, which adds up to a significant amount of your small EMI. 

Personal loans are often short-termed, and banks usually charge only minimal interest on the loan amount. It’s a suitable option if you want to opt for a loan temporarily. Additionally, you may have early repayment options with personal loans without having to pay an early repayment fee.

Buying a Second-Hand Car or Rebuilding a Salvage Car

Car loans provide you with a minimum amount, especially if you want to purchase a pre-owned car. Banks will consider maintenance cost, fuel efficiency, years of usage, and track history before providing you with a loan amount that often turns out to be inadequate.  

In a scenario where you want to rebuild a non-operational car that is titled a salvage, you will find it difficult to get a loan approved from banks. Car loans function by taking the car as a collateral object in arriving at a value. Banks will decline your application for buying an old car or salvage car, as they have little to no collateral value. 

On the other hand, options like Alex Bank- car loan financing are the best in this scenario. You could cover all the additional expenses you might incur, including maintenance, parts, and so on.

 Ownership Change

If you purchase a car through a car loan, you will not be considered the owner until you pay your final instalment of the loan amount. With the loan tenure for car loans being too long, you may find it difficult to exchange or resell the car as it is not under your name. 

However, when you use a personal loan to finance a car purchase, you will be the owner of the car from the day you buy it. You may transfer the ownership or sell the vehicle whenever you want without any issues. This gives you more options and opportunities as a car owner.

Ease of Access 

You can apply for personal loans over the internet or through your smartphone. Unlike car loans, they do not take too long to process. Car loans usually take 3-5 business days to be processed if all the documents are good.

It only takes minutes for you to complete the whole process. You can apply for a personal loan 24×7 in almost all the banks, with dedicated customer care personnel taking care of your requests.  And, provided your documents are good, your personal loan may be sanctioned in a matter of hours. 

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