Should I use a personal loan to buy a car?

Is it a good idea to use a personal loan to buy a car? It seems like a good loophole to avoid having my car repossessed.

Answer
While you can use a personal loan to buy a car, you should first weigh the pros and cons. In some cases, a traditional car loan is the better option, but analyze both to come to the best conclusion for your needs.
If you buy a car with a personal loan:
  • You have no risk of repossession since you won’t use your car as collateral.
  • You may be able to avoid a down payment.
  • You can choose an older car (older than 10 years or with more than 100,000 miles) or a car with a salvage title, as most lenders exclude these from traditional car loans.
  • Personal loan interest rates have a much higher APR than auto loans.
If you get an auto loan:
  • Your loan will have a lower interest rate because it’s secured with your car as collateral.
  • Getting the loan may be easier since your credit score won’t need to be as good to qualify for a car loan.
  • You may need to make a down payment.
  • You risk repossession if you’re unable to make the payments for more than 90 days.
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 and answer a few questions to see a comprehensive cross-analysis of the best policies across more than 50 providers including Nationwide, State Farm, and Allstate. Jerry will even handle the phone calls, paperwork, and renewals for your policy so that you don’t have to!
Liz Jenson
Answered on Nov 29, 2021
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