Personal Loans Vs Car Loans

If indeed you have decided you need a car, you may be considering different loan options to purchase the one you want. Most people who need to finance a car use either a personal or car loan. Both have their benefits, but you may be unsure as to which loan is better for you.

What’s The Difference Between A Car Loan And A Personal Loan?

Car loans can only be used towards the purchase or a car, while a personal loan is much more flexible and can be used for a range of other purposes including holidays, so if you are going to buy a car and possibly put some money towards another sizeable personal purchase, then you may want a personal loan. If you are only looking to purchase a car, then a car loan is perfect for you. Many loan specialists say that there is not a very large difference between the two loans, but there are some key factors that you should have in mind before taking out either.

Look Into Interest Rates

Just like for any loan, you always want to be well aware of the interest rate that you are being charged, as the interest rate will make a difference on how much you will have to pay in the long run. Some loans allow you to choose from variable and fixed, so if you know you can pay off your loan in a short period of time, choose a variable rate as it will usually be lower. If it will take you longer and you want to set your payments, you may want to select a low fixed interest rate.
Secured Loans Vs Unsecured Loans

Those who choose unsecured personal loans usually end up paying a higher interest rate than secured loans. Basically, this is to protect the lender since they do not have the actual value of the car to use as “security”.

However, with a secured car loan, financial institutions require you to take out comprehensive car insurance. So, if you want a better rate, it would be recommended to go with a secured car loan. No matter what type of loan you get, there will usually be upfront fees associated with the transaction, so you should be able to clearly see and understand these fees when you sign for your loan. However, what you may neglect to see are all of the hidden penalties that may be associated with your loan.

Many include early repayment charges and missed payment penalties, so before you take out a loan, you should make sure that it does not have these penalties to avoid any nasty surprises.

ME Bank provides first-class banking services like online savings accounts, personal loans, home loans and term deposits for Australians with an industry super fund.

Personal Loans Vs Car Loans
By Elizabethi Mcleana

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