In principle, a personal loan and a car loan are very similar: you apply for a financial loan from your bank or a credit institution in order to buy a new car, whether new or used. opportunity. It’s a way to invest in a car among others.
The amount of money requested is paid into your bank account, and you start repaying it by paying the monthly payments determined in the contract. The credit must be honored until maturity.
But if we take a closer look, we realize that there are some differences between these two types of loans, and that in reality they do not meet the same needs.
What is a personal loan?
The personal loan is a consumer credit. Each bank or credit institution determines its own rates and cap on borrowed money. This is a credit that can be no justification (unassigned), that is to say that the borrower is under no obligation to justify its proposed purchase, and the bank, in turn does not have to ask or know what the funds will be used for.
The personal loan is a contract of limited duration (maximum 5 or 7 years) and an amount generally capped at 21300 $, but some organizations agree to lend more (up to 75000 $ under certain conditions).
The rate is fixed and guaranteed until the end of the contract. This personal loan can finance the purchase of a car, a motorcycle, a trip, a wedding, children’s studies, etc. To be granted a personal loan without proof (or unallocated), the application file must be very solid. It is necessary :
- justify a stable job
- collect a regular income
- have an account without recent banking incidents
- not to be in a situation of over-indebtedness
- not to be stuck
- have a good ability to save.
The advantages of personal loan are numerous:
- assured discretion
- respected privacy
- a very competitive fixed rate
- no obligation to purchase
- reduced formalities
- fast and flexible credit.
The only drawback, and not least, is that this credit is really not secure in the event that the good (or service) is non-compliant, or not delivered: there is no way to cancel the credit!
The personal loan can however be affected, and in this case, the bank must be informed of your purchase plan and it is entitled to ask for proof of purchase and proof.
Most of the time, the ceiling of the loan is re-evaluated, and some credit institutions only grant the maximum amount of 8000 $ if it is the purchase of a car, which considerably limits the choice of the vehicle !
With an amount of 8000 $, the Borrower can only afford a used car, unless you have a personal contribution beside…
What is a car loan?
The car loan is a credit obligatorily assigned to the purchase of a new or used car. This offers almost the same benefits as the personal loan, but with features and additional offers much more interesting.
First of all, the ceiling is 75 000 $, whatever the banks. The duration of the credit varies from 3 months to 7 years. There is a withdrawal period of 14 days. This credit exclusively dedicated to the purchase of a car (or a motorcycle) is a real guarantee of security for the banker, but also for the Borrower.
Indeed, if the sale is canceled, if the financing is not found, or if the delivery of the vehicle has not been made, the credit is simply canceled, as well as the contract of sale, and no monthly payment. is required.
It should be noted that, regardless of the auto loan contract, from a bank or from another credit institution, the longer the loan period, the higher the interest, and the more the total cost of credit will be. high also.
It is therefore recommended to compare the rates and loan conditions of several institutions before launching, and why not play the competition!
In summary, despite their apparent similarities, the personal loan and car loan are indeed different. If we want more flexibility and more freedom, we will opt for the first, and if we prefer to choose the security and guarantees, we will turn more to auto credit.