Personal loans are exactly what their name suggests. They are given to you as an individual and you can use the money that can be used for medical bills to starting a new business also to pay back the credit card debt. According to the debt that you have, their interest rates and repayment periods vary depending on your credit score. A personal loan is a money given to you with fixed interest rates and a fixed repayment period.
Because personal loans can be used for anything do not take the loan for unnecessary expenses as it will just keep on increasing your pile of debt. While taking a personal loan to pay your credit card debt pay close attention to the interest rates of both. Only take the personal loan if it makes sense according to the interest rate. It can happen that your debt will just remain with you in a different form. It is also not advisable to get loans just for luxury.
Although if you are in an emergency then the personal loan is a great idea to meet the emergency as the crisis you are facing right now doesn’t seem to end and using up all your savings right away might not seem like a good idea.
A car loan comes under a secured type of loan. Even though it is lent to you based on your credit score the security against it is the car you have. In case you don’t pay the loan back in time bank can seize your car.
A personal loan can be used for everything under the sun whereas a car loan is to be used for only and only purchase of the car. You don’t receive the money in your bank account it is paid directly to the merchant.
In the case of personal loans, businessmen often take more loans than needed and invest the rest to pay their EMIs you can’t do this with a car loan it cannot be used to invest in shares of stock.
Because a car loan is a secured type of loan you can avail of lower interest rates and longer tenures on it ranging up to 7 years or more based on the bank. Bank of Baroda car loan provides a tenure of 7 years. If you compare that to a personal loan they provide tenures of only up to 36 months that is only three years. This tenure might be too short if your loan is of a big amount. Personal loan interest rates and car loan interest rates both depend on credit scores a lot. But, when both are compared with each other personal loans come with a higher interest rate.
If you want to take a loan to buy a car then it makes much more sense for you to take a car loan due to its perks. But if you need money for something else then a car loan is of no use to you. Personal can be used for weddings, travel, house remodelling, etc.
If you compare credit scores required to get the loan approval then with a car loan you can get away with a lower credit score because the bank has the security of your car. In the case of a personal loan which is mostly availed as an unsecured loan, you need a perfect credit score for your loan to get approved.
With a car loan, you also get the security of owning a car and having an asset by availing a loan. If you are taking a personal loan for purposes in which you will not own a solid asset it is seen as less security.
Although remember while getting both the loans banks will check both your credit score and income proofs to see if you are eligible to pay back the loan or not. This way banks know that you will pay the loan back in time without having any difficulties.
Comments