Which one is better? Personal loan or Car loan


I want to purchase a car for commercial use. I have half of my savings and I want to take loan for the rest. I am same office employee so I can’t register commercial car on my name so I am planning to register car on my father’s name. Which loan is preferable in this situation, personal loan by me or car loan by my father? Also is it possible if I can take car loan by myself and register car to my father’s name.
Please answer my queries asap and Thanks in advance.


It is important to understand here that you need a car for commercial purpose and therefore you won’t be allowed a regular car loan (for private vehicle) by the banks. In this situation you have option to either get a personal loan or a commercial vehicle loan. Commercial vehicle loan are cheaper than the personal loan but there are some specific eligibility criteria that you need to fulfill. The vehicle (for which the loan is taken), is required to be hypothecated to the bank. The registration certificate (RC) must carry such hypothecation information, therefore you can’t take loan in own name and register the car to your father’s name. A copy of RC is also required to be submitted to the bank. The general criteria for commercial vehicle loan are:
• Any individual / partnership firm / company with more than two years of business experience.
• Existing owner of at least two commercial vehicles.
• Captive customers and transporters.
• RC book photocopies for vehicles owned
• Copy of Income Tax and Wealth Tax returns for past two years
• Details of your guarantor - his business, net worth, IT returns & Wealth Tax term copies etc
Rate of interest under commercial vehicle loan varies around 11% to 15%.
You can opt for a personal loan if you find difficulty in fulfilling the eligibility criteria for commercial vehicle loan. You can avail a personal loan in own name while register the commercial car in father’s name. The rate of interest in personal loan varies around 14% to 24% depending on bank.


Hi Vinee,

Always consider a Car Loan for purchasing a car. Car Loan rates are much lower than Personal Loan rates. Car Loan rates start at 8.5% while Personal Loan rates can be 10%-16%. In case you want to register the car in your father’s name, you have to make your father a co-applicant for a Car Loan. Banks usually allow only borrowers to own the car.

BB Expert


Personal loans and car loans represent two of the most common financing options. Assuming you meet their respective lending requirements, they can be relatively easy to obtain. These days, most lenders accept online applications for personal loans, and car loans are generally approved on the spot at the car dealership.
New car loan is secured against the vehicle you intend to purchase, which means the vehicle serves as collateral for the loan. If you on your repayments, the lender can seize the auto. The loan is paid off in fixed installments over the period of the loan. Much like a, the lender retains ownership over the asset until the final payment is made.