Personal Loan vs Car Loan: Key Differences

Choosing the right loan is crucial for your financial planning. Personal loans and car loans serve different purposes and come with different terms. Let’s compare them:

1. Purpose

- Personal Loan: Can be used for any purpose like home renovation, medical expenses, travel, or debt consolidation.
- Car Loan: Specifically for purchasing a new or used vehicle.

2. Loan Amount

Personal loans are usually unsecured and the amount may be limited based on your income and credit score. Car loans are secured by the vehicle itself and may allow higher amounts.

3. Interest Rates

Personal loans typically have higher interest rates compared to car loans because they are unsecured. Car loans have lower rates as the vehicle acts as collateral.

4. Tenure

Personal loans usually have shorter tenures (1–5 years) while car loans can be extended up to 7 years depending on the lender and the cost of the car.

5. Eligibility & Documentation

Personal loans require proof of income and credit score check. Car loans additionally require documents related to the vehicle purchase, like invoice and registration papers.

Use our Loan Comparison tool to see which option suits your financial situation better, and our EMI Calculator to plan your monthly payments.