Car loan or personal loan: how to compare them

Two loans with the same EMI can cost very different amounts overall. The comparison that matters is total cost, not monthly payment.

1. Compare the interest rate and type

Secured loans, such as car loans, usually carry lower rates than unsecured personal loans. Check whether the quoted rate is flat or reducing-balance, because a flat rate costs more than it appears.

2. Look at the total repayment

Multiply the EMI by the tenure. Longer tenures lower the EMI but raise the total interest.

3. Read the fees

Processing fees, documentation charges and insurance add to the true cost. Ask for the full list before signing.

4. Check prepayment and foreclosure terms

Some lenders charge to close early or make part-payments. If you plan to prepay, this matters.

5. Match the loan to the need

Borrow only what you need and for the shortest tenure you can afford comfortably.