Using a Personal Loan for Vehicle Finance – What to Know

July 25, 2019

If you’re in the hunt for a major purchase such as a brand new vehicle, taking out a loan could be your best option if you initially do not have the means to pay it off straight from your wallet. On that note, there are two types of loans that allow you to buy a car: car loans and personal loans, both of which have various advantages and disadvantages that will better suit your needs and interests. Both common financing options have lending requirements that are relatively easy to obtain, wherein personal loans can be attained through online applications while car loans can be done on the spot at car dealerships. In that regard, making the right decision will have a big impact on your future budget, so be sure to weigh your options fully before committing to a lender. 

 

What’s the difference between the two?

 

Personal Loan

Car loans are specifically made to provide funding for vehicles, however, many people also prefer to choose personal loans due to it having more flexibility than car loans. Not to mention, it is easier to apply anywhere between your local bank, credit unions, as well as through online applications. Another benefit is that it offers a low-interest rate without the need to put up collateral, as well as the following:

Unsecured – Lenders typically just look at your credit and financial situation to determine whether or not you are fit for lending. In that regard, personal loans generally don’t require collateral, though the interest rate may vary from low to high depending on the lender. 

Short Application Process – Personal loans usually have shorter applications due to its lack of collateral documents, allowing you to apply for one on the spot so long as you provide solid reasoning for your loan. 

Flexible Funds – As expected, car loans are generally limited to funding the purchase of vehicles only. Meanwhile, personal loans provide flexibility and allow the borrower to cover any accessories regarding your car as well as taxes and titling included in the process.

Car Loans

Considered as a branch under personal loans, car loans are structured around the purpose you have over your intent to purchase a vehicle, which makes it as collateral for the loan. On that note, car loans are used to cover the cost of a car and other expenses relating to it such as licensing and registration. While the application process is not as fast and convenient compared to personal loans, it is still relatively easy as you can get it anywhere from a car dealership, as well as a bank or online lender. The features include the following:

Lower Interest Rates

Your rates will be given at a competitive price range due to your vehicle acting as collateral.

Longer Application

Since this involves collaterals, car loan applications typically take longer as you will have to provide all the necessary details about the vehicle you are eyeing to buy. 

More Restrictions

As mentioned, car loans generally limit its funding to the purchase of a vehicle as well as licensing and registration.

If you’re looking to take out a personal loan in South Africa, Hoopla Loans is your best option. Get in touch with us today to see how we can help.