The optimum capacity of purchase decisions is determined by the capability and the upper cap of the loan amount that has been granted by the banking institutions to the borrower. However, a comparative detailed analysis between a personal loan and a car loan would reveal the differences between the application and the usability of both these forms of loans in the market.
Type of Loan- The first criteria on which both personal and car loans can be differentiated Is the type of loan it can be categorized or subjected to. A personal loan is a type of unsecured, private loan that can be taken from a banking institution when the interested borrower feels that he requires money to meet his personal or daily expenditure and other expenses. On the other hand, car loans are secured loans that can be availed by the monetary institutions of the country by providing cars or other vehicles as collateral security or security deposit to the banks. Car Loans can be availed when the consumer requires a high amount of money for making a large scale purchase or when he requires the amount to pay off huge medical bills at hospitals or nursing homes.
Loan Value and Interest Rates- The second criteria on which personal loans and car loans can be segregated and differentiated include loan value and interest rates. The loan value of personal loans limits up to 20 lac. This is the upper cap limit for personal loans offering a huge amount of financial purse to the borrower. Thus through personal loans, the borrowers can liquidate large-scale expenditures up to an amount of 20 lac. In the case of car loans, however, the value of the loan is dependent on the value of the car that is being kept as a collateral security deposit for the car loan.
Interest rates are also different between these two forms of the loan. Personal Loans have a completely separate rate of interest which can be levied according to a fixed percentage of the loan amount. On the other hand, the interest rates for car loans is much lower compared to the ones for the personal loan. Examples of Car loan include City Union Bank Car Loan which provides low and lucrative interest rates that help in generating a sense of inquisitiveness among the interest section of the borrowers. The tenor is flexible in repayment also when it comes to both personal loans and car loans. The tenure of repaying the loan is separate in the case of a personal loan as the loan tenure refers to the amount of time within which the loan will be repaid to the banking institution. In the case of car loans, the tenure of repayment of the loan is dependent on the lease period of the asset which has been kept with the bank as a collateral security deposit.
Conclusion: With City Union Bank Car Loan being a principal institution of leveraging car loans and other banking institutions like State Bank of India, IndusInd Bank and Oriental Bank of Commerce are responsible for supporting the growth of personal loan.
