advantages and disadvantages of a car personal loan

There are many ways to buying a new car and one of those are to get a personal loan. Therefore such financing has its own advantages and at the same time there are disadvantages to it.

Advantages

1. You own the car
The main upside to opting for this type of car finance is that you will own the car that you are buying. The money that you are borrowing is from a third-party who has nothing to do with the actual car; they have no rights over it.

2. You can sell the car
Because you own the car outright, you can sell it off at any time. If you really need to, you can sell the car off and pay off your loan and then use the rest of the money to buy a more affordable option.

3. You can make repayment changes
If you are struggling to make the repayments, there are chances that the loan provider will help you more than a car dealership.

4. You can arrange affordable monthly payments
You can arrange everything upfront, including the monthly repayments. This is possible with any type of car loan, but it usually easier with a personal loan.

5. No deposit
There’s no need to put a deposit down for the loan, like there is when you take out a loan through the car dealership. You don’t need to save up to begin with, which is a stressful time for some people.

Disadvantages

1. You may not get the loan- You will need to go through a credit check so you may struggle to get the loan. Providers like to know that you are being sensible with your money so they are less likely to give out a car loan if you are already struggling with debt.

2. The eligibility criteria are stricter in case of personal loans, since there is no security required and the paper work is minimum.

3. The bank checks on your capability to repay more than any other loan due to the same reason.

4. Since the bank has a higher risk while providing personal loans, they follow a list of approved categories of borrowers.

5. Interest rates for personal loans could range from 12 percent to 30 percent, while the service charges and prepayment penalty are also very high.