If you need money to buy a car, the most obvious choice for most people is a car loan. But have you ever considered the option of funding your purchase with an unsecured credit line? There are several benefits of buying a car with a personal line of credit but before looking into the benefits, there are a few important points that you need to consider.
To ensure that the car loan does not disturb your budget, it is important that your EMIs do not exceed 15-20% of your monthly income. So, make sure you shop around for different financing options and compare their annual percentage rates so you know the monthly repayment amount in advance. You also need to remember that when you opt for a car loan which is a secured loan approved against the ownership of your vehicle and you fail to repay, the bank takes the possession of your car and sells it to recover the money.
The tenure of the loan also has an impact on the overall loan amount, so depending on your repayment ability you can choose the tenure. But it is important for you to know that a shorter tenure means less interest. So, if you do not want to end up paying more interest, keep the tenure short.
Finally, if you opt for a car loan or a bank loan to fund your car purchase, you would need to submit several documents like PAN Card, Proof of Income, Address Proof, Proof of Identity, Age Proof, Bank Account Statements, Salary Slips, Income Tax Return Statements, etc.
Now let us take a look at why a personal line of credit makes a smarter choice to purchase a car:
1. Comparatively Less Complicated to Avail Of
A personal line of credit can be used as a personal loan without going through any painstaking paperwork or a complicated application process that involves endless documentation. All you need to do is go online, install an application, fill in your basic information and know if you qualify for the loan in minutes!
2. Quick and Easy Approvals
Unlike conventional personal loans, an unsecured personal line of credit does not keep you waiting eternally. As soon as you complete your KYC documentation online, the approval process is initiated and within a few days, the money is available to you for anytime, anywhere usage!
3. Relatively Lower Interest Rates
If you opt for a traditional personal loan, you are charged interest on the entire approved amount from day 1 but with a personal line of credit, you are required to pay interest only on the amount you withdraw. So, while the interest charges on a credit line may be relatively higher due to zero collateral, the closing costs are much lower as compared to your conventional loan.
4. Flexible Repayment Options
Whether you are buying a brand new car or a used car from a private seller, with a personal loan from a line of credit, you can choose a convenient repayment tenure that typically ranges from 2 months to 3 years and also approve your EMIs as per your repayment ability.
5. The Freedom to Own Your Car Fully, Straightaway
With a traditional car loan, you do not get the ownership of the car until you make the final repayment, but with a personal line of credit, you can pay the entire amount upfront and own your car right away.
Now that you know the best funding option for your car, make your final decision absolutely stress-free with MYNEWCAR.IN – the smart and easy way to buy your new car online!
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, the first Indian app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org