Potential car customers often turn to various kinds of financing options to generate the extra cash that is required to make the purchase. The most popular form of financing solutions that customers often use is loans. There are two main types of loans that customers use while purchasing cars, personal loans, and car loans. Both have their respective lending criteria that must be met in order to secure the funding. Most types of banks and lenders today accept online applications for personal loans. Car loans, on the other hand, are usually secured at the car dealership itself while making the purchase.
There are many significant differences between personal loans and car loans. The most vital difference is that personal loans can be utilized in any manner that the customer sees fit. It need not be necessarily used for purchasing a car. They can be used to fund a holiday, major renovations, weddings, and other major financial expenditures. Car loans that are taken at car dealerships have to be used for purchasing a car. Thus one can say that personal loans are far more flexible than car loans. Each of these types of loans has its own advantages and disadvantages. Mentioned below is an overview of both of these types of loans.
Personal loans - Unsecured personal loans usually have high rates of interest and the entire loan amount is paid in a lump sum amount. The borrower can then choose to use this amount as per their requirements. The usual range of unsecured personal loans lies between $1,000 to $50,000. There are different kinds of securities that can be taken as a mortgage in personal loans such as real estate properties, cars and other kinds of major assets.
Car loan - Car loans are usually secured loans that are taken against the vehicle that the customer wishes to purchase. When car loans default, the automobile dealership usually seizes the car back. The interest rates on car loans are also fixed and the loan is usually paid off in fixed installments. Secured loans come with lower lender requirements when compared with unsecured loans.