Car loans are now offered for any type of the car – new or used one. And the approvals are quick. Although individuals opt for new car compared to second hand car, the demand for used car is still significant. Although car loan for used car is offered by many lenders, there are many conditions applied. In such cases, personal loan is recommended. And here are the reasons when personal loan for used car is recommended:
Buying second hand car is easy:
Not every bank offers car loan for used car. And even if they do, certain terms and conditions are applied. The most important being:
1) Age of the car – Lenders offer finance to only for the cars which are less than 5 years old.
2) Make and model – If you are planning to buy second hand car whose make/model is no longer manufactured or has poor demand, then loan application will get rejected.
In case of personal loan, no such conditions are applied. And while taking the loan, there is no need to provide the purpose. This is mandatory in case of car loan.
No need of hypothecation i.e. getting car title changed after payoff:
When you take car loan for new car from any lender, the holder of the car title is the lender himself. And until you pay-off the entire amount, it remains on their name. However, even if you repay the entire loan amount; the lender continues to remain the owner. You can legally become owner, only after changing the hypothecation in the RC book after personally visiting regional transport office (RTO) office.
Sell car anytime:
Whether vehicle loan is taken for new or old car; selling is allowed, only when the loan amount is fully paid and name in RTO is changed. However in case of personal loan, there is no such restriction, as you are the owner of the car. And you can sell car it anytime – be it new or old.
You can buy used car, no matter what the age is:
Most financial institutions offering car loan will reject the application, when age of the car is old or when the vehicle is already sold multiple times before. However in case of personal loan, there is no such restriction. This is because there is no need to provide purpose of the loan.
You want to modify the car:
Money received through personal loan can be used for – car modification, repair works etc. This is not possible in case of car loan.
Read more on car loan for cibil defaulters.
Avoid name change in insurance policy document:
Similar to name change in RC book; you will have to change name in the insurance policy document, by providing NOC copy received by the bank to the insurance company and RC book copy received from RTO.
Avoid location change:
Suppose you have taken car loan in Maharashtra. After paying-off all the installments, you shift to Andhra Pradesh, then you will have to remove hypothecation in the state of Maharashtra only. You cannot do the same in Andhra Pradesh. In case of personal loan, there is no such requirement.
Read about car loan or personal loan for car, what to choose?
However before taking personal loan for second hand car, two important points should be taken into consideration:
- Personal loan is costly: Interest rate on personal loan is 4%-5% higher compared to car loan. This is because, it is unsecured type of loan.
- If you are planning to buy second hand car thorough personal loan, then check whether total cost is less after adding the interest income.