Personal Car Loan

There’s more than one way to buy a car

A personal car loan is a flexible financing option you can use to buy a car—especially from a private seller—or cover vehicle-related expenses like repairs or upgrades. A personal car loan can be a great option for some, but it’s not the same as an auto loan from a car dealership. Here are the key differences and why they matter.

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Can I use a personal loan to buy a car?

While you can use a personal loan to buy a car, personal loans are not the same as auto loans. Auto loans can only be used for car purchases, while personal loans can be used for almost anything.

Auto loans are usually secured loans, which means your new car acts as collateral. If you default on your car loan, the lender has the right to recoup their costs by repossessing your vehicle. This gives the lender some extra reassurance, which is why auto loans often have lower interest rates than personal loans, which are typically unsecured.

Is a personal car loan right for you?

A personal car loan might be a good fit if:

• You’re buying a car from a private seller who doesn’t offer dealership financing
• You want to avoid using your car as collateral
• You’re facing a major repair or upgrade that’s outside your budget
• You need fast funding and flexible use of the loan

It’s also worth considering if you don’t qualify for a traditional auto loan or want more control over loan terms.

Pros of using a personal loan to buy a car

• Larger loan amounts. With a traditional auto loan, you can usually only borrow up to the total cost of the car. Personal loan lenders, however, may let you borrow more. You can use the excess for debt consolidation or refinancing, paying down credit card debt, or other purposes.
• Flexibility. Auto lenders may need to approve your car before issuing auto financing. But with a personal loan, you can buy any car you like. That includes new vehicles as well as used cars from private sellers.
• No collateral. With an unsecured personal loan, you won’t have to use your car as collateral.
• Potentially lower fees. Dealers often charge hefty fees, including origination fees. Getting a personal loan from a bank or credit union could help you avoid extra costs.
• No down payment. Some auto lenders require a down payment, especially if you have bad credit. Personal loan lenders don’t.
• Fast funding. Online lenders issue personal loans quickly—sometimes as soon as the next business day.

Cons of using a personal loan to buy a car

• Shorter loan terms. Personal loans typically have less generous repayment terms—usually three to five years. Auto loan lenders, however, may offer terms of up to seven years.
• Higher interest rates. Because they’re unsecured, personal loans often have higher rates.
• Credit requirements. You may need good credit to qualify for an unsecured personal loan.

What credit score do I need to get a personal loan to buy a car?

Personal loans are available to borrowers with a range of credit scores. That said, you’ll often get lower rates if you have excellent credit history. You’ll typically need a good to excellent credit score—at least 650 to 700—to qualify for the lowest rates on most debt consolidation loans. But eligibility requirements vary by lender, and you don’t need perfect credit to benefit.

You can check your creditworthiness by pulling your credit report for free online.

Tips for buying or repairing a car with a personal loan

• Get a quote or estimate before borrowing
• Consider total ownership costs: insurance, maintenance, taxes
• Don’t borrow more than you need
• Use a loan calculator to estimate monthly payments and interest over time

FAQs about personal loans for cars

Can I use a personal loan to buy a car from a private seller?

What’s the difference between a personal loan and an auto loan?

Can I use a personal loan for car repairs?

Can I get a personal loan if I have bad credit?

How do I get a personal loan to buy a car?

You can get a personal loan by comparing lenders, checking your rate, and applying online or through a bank. Most lenders require good credit, proof of income, and basic documents. Once approved, you’ll sign your agreement and receive funds—often within a few days.

1 24 hour funding is not guaranteed and is subject to the availability of funds which includes but is not limited to the time of loan approval, verification requirements, and bank processing times.

Loan proceeds may not be used for postsecondary educational expenses, including refinancing federal or private student loans.