Understanding the Differences Between the Functioning of Car Loan and Personal Loan

 In the case of personal loan, we are aware that it is generally levied by all segments of the society since the area or the ambit covered by the functioning of personal loan is much larger than the ones covered by all other forms of loan operating in the financial environment of the country. On the other hand, when we talk about car loan we speak about a definite purpose or scope under which the loan facility can be availed and that is the biggest indicator of how the car loan function in the economy and assist the process of economic growth and development in the country. Certain differences do exist in the functioning mechanism of car loans and personal loans but they genuinely suggest that their functioning is assisted through the adoption of both these forms of loan as viable financial instruments in the economy. 

However, despite all the existing similarities, there exist certain differences between the functioning of both the aforementioned forms of loans in the market structure-

Functioning Mechanism of the Loan Elements- The differences between both the aforementioned forms of loans exist between the functioning mechanism of both the aforementioned forms of loan facilities in the department of functioning mechanism. For example- in the case of a personal loan, the borrowers need to fill out the application form containing the personal and income details and then provide the required number of documents that are necessary for aggregating collectively how the loan mechanism operates in the functioning of the economic elements in the system.

However, the operational mechanism is slightly different under the functioning of a car loan in which you are required to mention the reason behind your taking of the loan amount and also the amount of money you are intending to take as a loan from the banking institution. The bank would also check whether you are capable of repaying the loan amount within the specified time. For example- if upon inspection the banks find out that your income is below the required criteria of a monthly 30,000 for availing a loan facility of 10,00,000 then the loan facility would be discarded immediately. Like all other loan facilities, both car loans and personal loans fulfill the objective of being monetary assistance to the functioning of the economic variables and helps in liquidating growth conditions in the economy. Thus the interest rates for a personal loans are in the range of 10%-12%. 

On the other hand, the car loan interest rate range from 8%-10% since the specificity of the purpose of a car loan allows the consumers more time to square off the necessary loan amount. 

The difference in rates of Interest- The second big difference that exists between the aforementioned forms of the loan in the market is the crisis faced during the functioning of the loan when the existing rates of interest are different between the two mentioned forms of loan. While the Bank of India car loan for a personal loan is very high since the amount is to be paid off within a short period and therefore the interest charged is high since the banks need to cover up the necessary loan amount within a short period. 

Conclusion -:Thus existing differences in loans suggest that two very different loans have similar objectives in mind- to develop the financial system in the country and bring about economic diversification in financial operations. If you have any queries about the car loans, we suggest you drop your questions in the comment section and our executives will get back to you with a productive solution in the least possible time. 

Also read this:Get the best car loan online!