Best Personal Loans to Buy a Car
April 2024
It is usually best to use an auto loan to buy a car, but in certain cases, personal loans can provide important advantages. Here are our top picks for the best personal loans to buy a car.
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About 85% of new cars and 54% of used cars purchases are financed. Most people get better rates and terms with a traditional auto loan. However, if you're interested in buying a car, but don't have a down payment or don't want your car used as collateral, a personal loan can be a valid alternative. Personal loans don't require a down payment and provide a lump sum you can use however you see fit. For example, you could buy a car and use the extra funds to cover other expenses. Buying with a personal loan can also you give you more flexibility when choosing a car and negotiating a price.
However, it is important to note that personal loans also have important drawbacks. For instance, it's harder to qualify for large ammounts and you will probably pay higher interest rates than with a regular auto loan. Before making a decision, find out what rates and terms you qualify for with the top-rated lenders to buy a car.
Methodology
SuperMoney's list of the top-rated personal loans to by a car is based on the qualitative recommendations of our community members and the quantitative recommendations of our ranking algorithms. We analyzed more than 100 lenders and focused on lenders that provide large loan amounts, low interest rates, and long terms.
Common Questions About the Best Personal Auto Loans
Can I use a personal loan to buy a car?
Yes, you sure can. Although auto loans are the more common loan product for car purchases, personal loans can also be used to buy a car. Personal loans can be used for almost any purchase the borrower wants to make. As long as you can get approved for a loan amount high enough to afford the car you want to buy, you can take out a personal loan to pay for it.
How to finance a car from a private seller?
If you want to buy a car from a private seller, you should first find the car you want, so you know how much you need to borrow. Then, you can opt for a secured auto loan or a personal loan.
If you go for the auto loan, it will be a more involved process as the lender will need all the information about the car you want to buy. They may need to inspect it and will research it before approving your loan. If approved, the lender will usually pay the the seller or lienholder the amount you owe. All this takes time to process. A personal loan, on the other hand, is not secured, so if you qualify, you can get approved in minutes and can get funded quickly.
Personal loan vs. auto loan - Which is better to buy a car?
Personal loans and auto loans both have their pros and cons. The right choice will depend on your situation. Here are the factors to consider.
Personal loans are unsecured, so you can use them to finance any type of car, regardless of how new or old. You can also borrow more than you need for the car and use the balance for other expenses. Additionally, you will own the car outright immediately and won't have to put down a down payment. If you happen to default on the loan for some reason, the car won't be repossessed without a judgment.
The drawbacks to buying a car with a personal loan include higher interest rates and stricter eligibility requirements. If your credit is less than excellent or you don't have a high income, you will have trouble getting approved for a high loan loan amount or competitive rates and terms. However, with good to excellent credit, you will likely get an attractive offer.
Auto loans are secured by the vehicle you buy which often means more lenient eligibility requirements and attractive rates and terms. You can often borrow more at a lower cost even if you have less-than-perfect credit. You also may get access to add-ons like insurance or a warranty.
On the other hand, auto loans often restrict what kind of car you can buy, require a down payment, and use the car as collateral. You won't own the car until the loan is repaid, and it can be repossessed if you miss a payment.
In summary, personal loans for car purchases can be advantageous if you qualify for a loan with good rates and terms. If you can't, an auto loan will be the better route.
What are the pros and cons of buying a car with an personal loan?
How to use a personal loan to buy a car
Once you find the best personal car loan available to you and agree to the terms, the money will be sent to your account of choice. With the money in hand, you can go to the seller and pay as a cash buyer.
Who has the best rates for unsecured car loans?
To find the best rates for unsecured car loans, you will have to shop around. An excellent place to start is with this list of the top-rated personal loans to buy a car. You can get prequalified with many of them, enabling you to receive quotes that you can compare against each other to find the best deal.
Make sure you have the best rate possible before you accept a loan offer. SuperMoney's loan offer engine allows you to get competing offers from leading lenders without hurting your credit or wasting time with multiple application forms.
About the Author
SuperMoney
SuperMoney is the most comprehensive financial services comparison site around. We have published hundreds of personal finance articles and provide detailed reviews on thousands of financial products and services. Our unbiased advice and free comparison tools help consumers make smart financial decisions based on hard data, not marketing gimmicks.
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