Can I use a personal loan to buy a car?
I'm planning to buy a car. I'm trying to decide what kind of loan I want to get. I keep seeing things about auto loans and personal loans. I don't know why personal loans keep popping up. Can I use a personal loan to buy a car?
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.
- They require a down payment.
- They necessitate proof of car insurance.
- There is generally a cap on the age of the vehicle you’re able to purchase (10 years).
No matter which way you choose to finance your vehicle, you can save money on other car expenses—like car insurance—with Jerry. Jerry is an insurance comparison app that shops for low prices with over 50 different insurance companies for free. You will get quotes in seconds, can make changes at any time, and if you ever have any questions, agents are just a text away!
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