A personal loan can be used for almost anything, which includes car purchases. But just because you can use a personal loan to buy a car doesn’t mean you should. There are a few circumstances where a personal loan is a better solution than a usual car loan to finance a vehicle.
Please take a look at when it makes sense to get a personal loan for car purchases.
How personal loans work
Many loans are designed for a specific purchase, but personal loans can be used for anything. You can use the proceeds from a personal loan however you’d like, whether it’s to refinance debt, buy a car or go on a vacation. Because this loan isn’t consistent with how you plan to use the money, there aren’t any outside forces that can cause a strain on your plans. You don’t have to get a car before applying for a personal loan. But with cash in hand, you can confidently pay cash once you decide to get a car.
When to get a personal loan to buy a car
A personal loan is quite different from a car loan — they aren’t specifically issued for a vehicle purchase. Some cases may make sense to use this loan to buy a car rather than opting for a car loan.
• You’re buying a car from a private party — Banks offer loans to purchase cars from individuals, but you’ll need to find a seller who is willing to jump through some hoops. It can make sense to use a personal loan to fund the purchase. Later, after taking possession of the car, you can get a traditional car loan against the car to repay the personal loan balance amount.
• You don’t want to carry full coverage insurance – To get a traditional car loan, you’ll need to carry “full coverage” car insurance for the vehicle, which includes collision and inclusive coverage to provide financial protection against damage, theft, and other such risks. If you use a personal loan to buy a car, you won’t have to carry full coverage auto insurance, saving you money at the cost of taking even more risk if you get in an accident or your car is stolen.
• When you’re buying a project car – Most banks avoid making car loans for cars that aren’t in road-worthy condition. Older cars, damaged cars, and rebuilt titles can be difficult to finance with a car loan.
The easiest and most practical solution to buy a car is through personal loans for the simple reason that they often offer the best mix of interest rates, repayment terms, and availability for the majority of car purchases. To calculate your personal loan EMI, you can take the help of a personal loan EMI calculator. It has been designed in such a way that anyone can use it. If you get your car financed through a personal loan, you will get your car’s ownership pretty easily with no-down-payment if you secure the desired loan amount.