【Daily Knowledge】The difference between auto loans and general personal loans

1. Definition

Car Loans

• Definition : A loan specifically for the purchase of a car. The car itself serves as collateral.
• Usage restrictions : can only be used for car purchases and cannot be used for other consumption.

General Personal Loan (Personal Loan)

• Definition : A loan that is not earmarked for any purpose, usually without security or collateral (i.e., an unsecured loan).
• Usage restrictions : Can be flexibly used for any legal purpose, such as consumption, decoration, travel, urgent need for cash, etc.

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2. Collateral

Car Loans

• Secured : The car itself is used as collateral. If repayments are not made, the bank can repossess the car.

General personal loan

• Unsecured : Usually no property is required for collateral. Only personal credit approval is required.

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3. Loan interest rate

Car Loans

• Lower interest rates : Since there is collateral, the risk is lower and the interest rates are usually lower than private loans.

General personal loan

• Higher interest rates : These are unsecured loans with higher risks and usually higher interest rates.

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4. Loan amount

Car Loans

• According to the car price : Usually the maximum loan amount is 70% to 100% of the car price (depending on the bank's policy).

General personal loan

• Based on personal financial situation : The loan amount is usually calculated based on income and credit score, and there is a maximum limit.

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5. Repayment period

Car Loans

• Longer : The installment repayment period is generally 2 to 7 years.

General personal loan

• Shorter : The repayment period is usually 1 to 5 years.

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6. Application Procedures

Car Loans

• You need to submit a car purchase contract and vehicle information , and the procedures are relatively complicated.

General personal loan

• Only proof of identity and income is required , and the procedure is relatively simple and quick.

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7. Impact

Car Loans

• If you default : the vehicle will be repossessed by the bank, but it will have an impact on your credit.

General personal loan

• If you default , your credit score will be greatly affected, and in serious cases, you may be subject to legal action.

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