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Car loan or Car overdraft

The car overdraft is essentially a secured loan like a home mortgage loan

Apnaloan.com Research Bureau

22 Jan 2008

The car overdraft or the overdraft against car is essentially a secured loan like a home mortgage loan. It allows you to take a loan on your existing car, by pledging the car registration papers with the lender.

There is a difference between the traditional car loan and the car overdraft - The former is used to purchase a car while the latter is typically an instrument to raise money for a sudden money requirement by pledging a car you already own.

Just like a personal loan, there is no restriction on the end-use of a car overdraft.

 

Car loan

Car overdraft

Interest calculated on monthly reducing balance basis

Interest charged on daily reducing balance basis only on the amount used

Loan amount up to 80-95 per cent of the actual car value

Loan amount up to 90 per cent of the value of the car

Loan given for a 5-7 years

Loan given for a period of 1 year

Used to purchase a car

Used to raise money by pledging a car