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Personal Loan for Cars: All you need to know
- Published on: 8 Feb 2024
‘Can I buy a car in cash?’ This is one of the most common questions that pops up when you decide to purchase a vehicle. On second thought, if you are wondering whether you should opt for a personal loan for cars rather than paying it entirely by cash, there are several things you need to consider.
For instance, paying in cash would mean dipping into savings, whereas choosing a loan would mean paying in instalments with interest. By understanding such advantages and disadvantages of both options, you can make an informed decision that suits your needs.
Read on to know the pros and cons of buying a car in cash or with a loan and more.
Here are some benefits of using your savings for a four-wheeler purchase:
There’s not much waiting time involved, as you don’t need to get approval from anyone. All you have to do is choose your preferred brand and model and make a one-time payment.
Since no credit is involved and you are paying the cost in lumpsum, there are no interest charges.
With no third party or financier involved, the car is instantly available under your name. You don’t have to wait a few years or months for it like you would in the case of a loan.
Cons of Purchasing a Car with Cash
Some limitations of buying a car with your savings include:
The cost of a four-wheeler is high, going into tens of lakhs. If you pay for it through cash, you would have to accumulate a significant amount. This can take time and mean that you deplete your savings entirely.
When you pay in cash, you may have to stick to a certain budget. This may limit your options and you may have to make compromises in the make and model of your car.
Here are some advantages of getting a personal loan for cars:
With a loan, you pay in monthly instalments and not as a lump sum payment. As such, you don’t have to wait to accumulate the sum or be constrained by your budget. You can adjust the terms and find an option that best fits your finances.
In a loan, the amount you get depends on your credit profile. So, you can choose whichever vehicle you like without any compromises. Make sure you get the financing from the right lender.
Taking a loan and repaying it on time helps you build a good credit history. This can also help you in future borrowing because lenders offer affordable deals to individuals with good creditworthiness.
Here are some disadvantages of buying a car with a loan:
Financial institutions levy a certain interest rate on the amount you borrow. So, when you use a loan to buy a four-wheeler, you have to pay interest and other charges. This increases the overall cost and you end up paying more.
When the repayment planning isn’t done well, you may be unable to pay the loan on time or in full. This can lead to default or debt trap, which are bad for your finances and creditworthiness.
Example for Comparison
Here’s a hypothetical example with the following criteria:
Here is how it will affect your finances:
| Cost Breakup | Cash | Loan |
|---|---|---|
| Cost of the car | ₹10 lakhs | ₹10 lakhs |
| Down payment | – | ₹2 lakhs |
| Loan amount | – | ₹8 lakhs |
| Interest amount | – | ₹2,19,858 |
| EMI amount | – | ₹16,998 |
| Loan and interest amount | – | ₹10,19,858 |
| Total cost of the car | ₹10 lakhs | ₹12,19,858 |
To choose between the two options, you need to consider various factors concerning your finances. These include:
If you have accumulated enough savings, making your car payment through cash is the best bet, as there’s no debt burden. However, if you don’t have a lump sum payment to purchase your favourite car, getting a personal loan for a car is better.
If you prefer financing your car purchase through credit, you can opt for an Instant Personal Loan from Fibe. You can enjoy interest rates starting at 2% per month, zero foreclosure charges, and more. Download the Personal Loan App or access our website to get funds easily.
Whether you should buy a car on EMI or cash depends on various factors. Before finalising an option, you must assess the following:
Yes, a personal loan for cars can offer several benefits, such as:
You can choose from various lenders and apply online. Fibe is one such lender that offers instant personal loans at affordable interest rates and other benefits.
