Do you need Collateral for a Personal LoanNeed collateral for a personal loan?
Where is the fundamental distinction between a car loan and a personal loan? What to choose?
Several of the distinctions between a motor loan and a personal loan include: 1 ) Aim of the loan: If you have a loan for a motorhome, the aim of the loan is to buy a motorhome. It can be the purchase of a 2 wheel drive or 3 wheel drive or cars or any other type of vehicles. Private loans can be used for emergencies, marriages, holidays, repaying debts, etc.
There is no need for the debtor to inform the credit institute of the final objective or use of the personal loan. 2 ) Loan nature (secured / unsecured): Loan for a motor car is a guaranteed loan as it is taken out against the collateral of the purchased motor home. If Ramesh, for example, wants to take out a loan from ABC to buy a motor home, then Ramesh's motor home will be the guarantee for the ABC to offer the loan.
A personal loan is an unsecured loan as there is no collateral provided for taking out the loan. Pratik for example, if he wants to take a loan for his wedding, then he will go for a personal loan and this will be an unsecured loan. 3) Interest rate: As the car loan is a guaranteed loan, the interest on a car loan is lower than on a personal loan.
4) Loan term: A private loan has a short-term maturity of up to 36 month. At the same time, the duration of a car loan is medium-term and can be up to 7 years. In order to reply to the second part of the questions, whether one should choose a personal loan or a car loan, it will depend on the intended use or end use of the loan.
When the end use of the loan is to buy a car, then one should definitely go for a car loan and not for a personal loan. In this case, the advantage of a car loan is the lower interest rates and the longer term in comparison to a personal loan. So if the object of the loan is something else like medical emergencies, marriages, vacations, loan repayments etc. then one should go for a personal loan.
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