Yes, you can use a personal loan to buy a car—and it is essential to consider all your loan options in order to choose the best one. There are some differences between a personal loan and an auto loan, though.
Personal loans are flexible. You can use them for anything. This can be beneficial if you want to buy a car that’s difficult (or impossible) to finance with an auto loan—like a classic car you want to rebuild, for instance.
Another great thing about personal loans is that they don’t require a down payment. Other characteristics specific to personal loans include:
A higher credit score is needed (670 or higher).
They are unsecured, meaning there’s no collateral. This often equates to a higher interest rate.
Interest rates are often between 3% and 30%.
They come with shorter term lengths (aka payback durations).
There are typically higher fees and prepayment penalties.
Auto loans are the norm when buying a vehicle. They are generally cheaper and easier to get. Here are a few things to keep in mind:
You can get a car loan with bad credit or no credit.
Interest rates are often between 3% and 20%.
They come with longer loan terms.
There are typically lower fees and fewer prepayment penalties.
There is generally a cap on the age of the vehicle you’re able to purchase (10 years).
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