Can you take out a personal loan to buy a car?
Would I be able to take out a personal loan to buy a car? I want to get an older car but I know that can be harder with car loans sometimes.
While you can take out a personal loan to buy a car, it’s a good idea to weigh the pros and cons of a personal loan versus an auto loan first.
If you buy a car with a personal loan:
- Your risk of repossession is lower since your car won’t have a lien.
- You probably won’t need to make a down payment.
- You’ll have more freedom when choosing the car you’d like to buy since your lender won’t have a say.
But there are some cons to consider, including:
- It could end up costing you more since personal loans tend to have a much higher APR than auto loans.
Apply for an auto loan has its perks, such as:
- It will be more affordable. A car loan could save you thousands of dollars in the long run due to lower interest rates.
- Using the car as collateral means it’s easier to get a car loan with a lower credit score.
On the other hand, car loans have their drawbacks, including:
- You won’t have as much freedom when choosing your car, since your lender will have requirements that you’ll need to meet. If your car of choice is older, this could pose some difficulties for you, but it’s worth asking a few lenders before giving up on the possibility entirely.
- You’ll need to make a down payment. If you haven’t saved up for a down payment, it may be more difficult to find a car loan.
- You risk repossession if you’re unable to make payments as agreed.
Regardless of how you decide to purchase your new car, you’ll need to get an insurance policy for the vehicle, too. Download the Jerry app to compare personalized rates from more than 50 of the top providers, including Nationwide, Allstate, and Travelers, in minutes for free. Jerry will handle the phone calls, paperwork, and renewals for your top pick so that you don’t have to!
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