A person avails a loan from a financial institution or a bank to meet his/her immediate financial emergency or to balance out the cash crunch they foresee facing in the due course of time. A Personal Loan and Car Refinance Loanare two of the most common types of loans that a person seeks for financial rescue. Let us talk about Personal Loan and Car Refinance Loan and try to find out if a Personal Loan or Car Refinance Loan is better for you.
The Personal Loan
If anyone is facing an unforeseen financial crunch,a Personal Loancan be put to use so as to meet their needs. Anybody who is struggling to keep up with the cost of education, wedding planning, home renovation, medical expense, anything and everything on that line, can avail a Personal Loan.
The Car Refinance Loan
In case of a Car refinance loan, a person can avail a loan on their existing car only after pledging the registration papers of that car at the lending institution or individual. Basically, a Car Refinance Loan is a secured loan that is similar to a home mortgage loan. Some people tend to get confused between a car refinance loan and a traditional car loan, as they overlook the basic point of difference between the two. In case of a traditional car loan, a person has an ultimate aim of purchasing a brand new car with a borrowed sum of money. While in case of car refinance, a person uses his/her existing car to meet a current financial need by pledging the same to a lending institution or an individual.
Anyone availing a Car Refinance Loan can use this type of loan to meet an array of their personal requirements as there are no such specific restrictions on its end-use. Though the person availing the car refinance loan has to complete a lot of paperwork to actually get the loan, when it comes to interest rates, it is comparatively lower than on a Personal Loan. Anybody who has a functioning car can avail a car refinance loan to meet their financial requirements without looking at other types of loans.
Personal Loan VS Car Refinance Loan
One cannot simply pickthe best alternate in loans going by names. One needs to know the features of each type of loan and gauge their effectiveness in their own case to finally decide on if a Personal Loan or Car Refinance Loan is the right option for them.
Let’s weigh the following features of each type of loan, to decide a clear winner in the match of merit between a Personal Loan VS Car Refinance Loan.
Features and Benefits of a Personal Loan
- It is typically an unsecured loan
- The amount of loan amount is decided on the basis of one’s monthly income
- There is minimal paperwork requirement
- Fewer paperwork results in fast processing of the loan
- Hassle-free processing ensures speedy disbursal of the loan amount
- Convenient at a time of financial emergency
- One can avail flexible loan repayment options
A Personal Loan tends to have a comparatively higher interest rate than a car refinance loan. While at the same time the processing fee involved in a Personal Loan is also relatively higher than a car finance loan.
Features and Benefits of a Car Refinance Loan
- It is typically a secured loan.
- The loan amount is decided on the basis of the strength and condition of the pledged car
- One can raise a sum up to 60-80% of the car’s estimated value
- The rate of interest is comparatively lower
- The processing charges of the loan are also relatively lower
A Car Refinance Loan requires thorough paperwork and meticulous processing of the loan plea before disbursing the estimated loan amount into the account of the person seeking the loan. Though the rate of interest and charges of processing the loan is comparatively lower in case of car refinance loan, the thorough processing of the loan plea makes it difficult for a person to avail an instant loan at a time of financial emergency.
So, whether to seek the assistance of a Personal Loanor Car Refinance Loanshould always be based on your financial need and your ability to repay the loan within a stipulated time. Weigh in the pros and cons pitted against Personal Loan VS Car Refinance Loancarefully, before deciding your ideal loan option.