# Personal or vehicle loan: pros and cons?



## PM101 (Jan 12, 2011)

Hi,

The time has come for me to get a car for myself and the family and I am weighing up options as to finance. 

It seems to me that a vehicle loan offers a lower rate of interest (e.g. 2.99%) but there is a significant downside in that if I wanted to sell the car early there are all sorts of complications as the bank effectively owns the car.

The alternative is a personal loan which would mean that I could sell the car easily and without having to deal with the bank. The downside is that the interest rate is marginally more (e.g. 4.55%) but over a two year loan period on about 160k worth of cars, I am not sure that the difference is too significance (works out at about 4,000 DH I think over the two years).

Is there any reason why I wouldn't want to get a personal loan and use that for the cars?


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## Confiture (Jan 9, 2011)

I took a personal loan for our car.

For me, the rate difference vs flexibility as you say, was pretty marginal. The main factor though, was not having to put down a deposit of 20%.


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## Canuck_Sens (Nov 16, 2010)

Note that in the UAE they work with the concept of profit rate or flat rate. This rate is different from Balance reducing rate that we are used in North America. The Basic difference is that if the profit rate is 2% you are actually paying way more in terms of interest. The interest amount in the profit rate is calculated by the amount of the loan times the profit rate times the term of the loan. Also, Banks charge fees to open the loan facility.

You will not have an option to get by this. If you are planning to stick around for more than 2 years then going for a new car would make sense. I would advise buying a used one. There are pretty good deals with used cars and do not expect to make money on the sale because that's not the purpose here at least.

Car loans tend to be cheaper. After all, you car is used as collateral in case you default


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## quattro (Dec 25, 2008)

Are car loans easier to get if you've just entered the country as they are secured against the vehicle? 20% is no problem for deposit if that helps?

Ideally I'd want a personal loan so I can go out and buy used as I should be able to get a decent deal, plus I'm not worried about having a warranty so not planning on buying off a dealer.


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## Dubai_NewKid (Feb 17, 2011)

hey im considering buying a second hand car myself....getting a car loan makes sense for me personally, however i have a question

If i want to sell my car during the loan period, what are the repurcussions?

Also can my loan be transferred to the BUYER?

If i want to settle my loan before the term, will there be any additional damages levied by the bank?


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## Mr Rossi (May 16, 2009)

Chances are you won't get a car loan unless the car is new or 1-2 year old through one of the main used car dealerships. The bank has to 'see' the car before issuing the loan. Personal loan you can do what you want with the money.


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## quattro (Dec 25, 2008)

Mr Rossi said:


> Chances are you won't get a car loan unless the car is new or 1-2 year old through one of the main used car dealerships. The bank has to 'see' the car before issuing the loan. Personal loan you can do what you want with the money.


I was looking at an 2007-2008 car so that answers that then...!


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## dubai_warrior (Nov 29, 2011)

The interest calculations don't work the same here .... when they say 5% interest, you would end up paying roughly around 15-20% interest during the entire period of the loan... so ALWAYS as for breakup of the payments to be made and ensure this includes ALL ADDITIONAL CHARGES ........ they are quite cheeky this way ........ and compare 3-4 banks ...

Best thing to do is ..... contact the banks and ask them to give you the breakup of the payment for the entire tenure of the loan (for both personal and auto loan) and compare the final amount paid (assuming that the cost of the car and the loan period is the same)....

Don't worry about selling the car later .. u will surely find a buyer and those are minor inconveniences that you need to go through to sell the car ....

If you don't mind a second-hand car .... it would help you cut down the car cost and u will get some great deals if you look around and bargain ... and also, try and find a vehicle that is covered under warranty ......... atleast at the time of purchase ......... and yes, always get the car checked at the Dealership before finalizing a purchase... it mayy cost around 200-300 dhs but will be worth it ... they will be able tell u if the car has had any majoy accidents.. what parts are due to be replaced shortly etc ..

simply put.... find a good car... get it check at the Dealership .... approach banks for payment breakup and compare the costs at the end of the tenure period ........ and u should be fine......


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