How to use a personal loan to buy a car in 2018

Buying a car with a personal loan

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Need to finance a new or used car? Find out if a personal loan is worth it.

Car loans aren’t the only way to finance a car. When you’re looking for a convenient and easy way to buy a car, a personal loan may offer a few extra conveniences you won’t get with a car loan. However, the interest rates may be higher, so compare your rates carefully before you apply.
Prosper Personal Loans

Prosper

You could borrow up to $40,000 for a variety of purposes, with rates starting from 6.95%.

  • Recommended Credit Score: 640 or higher
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: 40000
  • Loan Term: 3 or 5 years
  • Turnaround Time: 1-3 business days
  • Simple online application process
  • No prepayment penalties

    Personal loans vs. car loans

    Personal loanCar loan
    Cars you can financeAny carNew and used cars under around 10 years old
    CollateralNone with an unsecured personal loanYour new car
    TermsTypically 12 to 84 monthsTypically 36 to 84 months
    Pros
    • Finance any type of car
    • Plenty of different loan options
    • Funds can be used for additional expenses
    • Own your car outright
    • No deposit required
    • Designed for car purchases
    • Larger loan amounts sometimes available
    • Secured loans have competitive rates
    • Access to add-ons like a warranty or insurance
    • May qualify with less-than-perfect credit
    Cons
    • Rates are sometimes higher than car loans
    • More difficult to meet eligibility requirements
    • Expensive if you have poor credit
    • Must may for insurance and fees yourself
    • Restrictions on the type of car you can buy
    • Can’t be used to cover additional expenses
    • Lender technically owns the car
    • Usually requires an upfront deposit

    How does using a personal loan to buy a car work?

    When you have a personal loan, you can use that money like cash — simply use the deposit in your bank account to finance your car purchase. This is because personal loans work in a very similar way to car loans, although they have a few notable differences. You can request a loan for much more than the value of the car with a personal loan lender, and you don’t need to supply the vehicle details to your lender, just what you plan to do with the funds.

    Once you’ve received the personal loan amount you can use it for the car and however else you see fit. This can be especially useful if you need to pay for taxes and state title fees, or if you don’t have a large down payment saved up.

    Loan terms can range between one and seven years, and you can generally borrow between $1,000 and $50,000. Many of your options may even be unsecured, putting you at less risk if your financial circumstances change and you’re no longer able to make payments.

    You can borrow up to $50,000 for your next car.

    Compare your financing options

    Rates last updated August 17th, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Select your credit score range

    I don't know my credit score

    Finally, select where you live.

    To get your credit score:

    Experian logo

    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    6.16%–35.89% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    680
    $100,000
    7.075%–15.365% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    580
    $100,000
    4.99%–35.99% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    34%–155% (Varies by state) (fixed)
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    640 FICO®
    $35,000
    5.99%–29.99% (fixed)
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    $50,000
    4.99%–36% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    580
    $100,000
    3.09%–35.99% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    4.99%–29.99% (fixed)
    OppLoans Installment Loans
    Installment loans with competitive rates from a top-rated direct lender.
    Bad credit accepted
    $5,000
    99%–199% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    Varies
    $30,000
    16.05%–35.99%* (fixed)

    Compare up to 4 providers

    Rates last updated August 17th, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Select your credit score range

    I don't know my credit score

    Finally, select where you live.

    To get your credit score:

    Experian logo

    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Minimum Credit Score Term of Loan Requirements
    car.Loan.com Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    300
    Varies by lender
    Must be at least 18 years old, a US citizen with a current US address and employed full-time or have guaranteed fixed income.
    Auto Credit Express Car Loans
    Get connected with an auto lender near you, even if you have bad credit.
    300
    Typically 3 to 6 years
    Must be at least 18 years old and a current resident of the US or Canada. Must be employed full-time or have guaranteed fixed income of at least $1,500/month.
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or poor credit
    Minimum of 2 years
    Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
    MotoRefi Car Loan Refinancing
    A car loan connection service for borrowers looking to refinance.
    525
    1–6 years
    Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles.
    myAutoloan.com Car Loans
    Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.
    550
    24 to 84 months
    Must be at least 18+ years old; have a Social Security number; make $24,000+/year; have no open bankruptcies.
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    670
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.
    Capital One Auto Financing
    You could qualify for a car loan of up to 40000, but not all dealers accept this bank's financing.
    Good to excellent credit
    36 to 72 months
    At least 18 years old, have a valid street address, have existing Capital One accounts in good standing. Car must be a 2006 model or newer with less than 120,000 miles.
    Wells Fargo Auto Loans
    Auto loans with high loan amounts to cover your car purchase or refinancing needs.
    Good to excellent credit
    1 to 6 years
    Your income and assets must support your existing debt obligations and the desired loan amount.

    Compare up to 4 providers

    What are the benefits of using a personal loan?

    While a car loan may be better in certain situations, personal loans offer a range of benefits to those looking to finance a vehicle.

    • Flexible use of funds. Personal loans allow you to borrow as much as you need for nearly any purpose, so you can use your loan funds to purchase a car, upgrade your insurance or install custom modifications.
    • Buy a used car. While some car loan lenders only allow you to purchase a used vehicle under a certain age, you can finance nearly any car you want with a personal loan. This includes classic vehicles and used cars over 10 years old.
    • Variety of lenders. You may find a larger range of lenders and loan options if you look for an unsecured personal loan from an online lender rather than keeping your search solely on car loans.

    What are the drawbacks of using a personal loan?

    Choosing a personal loan to finance a car has downsides as well. Here are some of the drawbacks to consider:

    • Costs. Compared to a car loan, you will generally find personal loans have higher interest rates.
    • No add-ons. Car loans offer car specific extras — extended warranties and service plans —that generally aren’t available with personal loans.
    • Tougher requirements. You might have better luck qualifying for a car loan if you have mediocre credit — those are secured and more forgiving of a low credit score than unsecured personal loans.

    3 situations where a personal loan makes more sense

    Here are three situations where you might benefit more from a personal loan than a car loan.

    1. You’re buying from a private seller. Many car loans come with restrictions on where you can buy your car. If you’re interested in buying a car from a friend — or some guy you found on Craigslist — you might have an easier time getting a personal loan.
    2. You want to buy an older car. Vintage collectors and lovers of older vehicles can have a hard time finding car loans if the car is over a certain age or has too many miles on it. You might want to look into personal loans if you’re buying a fixer-upper or purchasing a customized classic.
    3. You can qualify for a lower interest rate. While most car loans may have a lower interest rate because they’re secured by your car, borrowers with less-than-perfect credit may find a better deal by opting for a personal loan instead.

    Buying from a dealership? A car loan could be a better idea

    It may be better to use a car loan or dealership financing when you’re thinking about buying from a manufacturer or car dealership You’ll be able to get a competitive rate and may have access to more convenient features with dealership financing.

    How much does a personal loan cost?

    Like all loans, personal loans will charge interest and stack on a few fees. Before you dive in, consider these basic points when comparing your loan options.

    • Interest rate. Interest can be either fixed or variable and can range from 5% to 36% depending on the type of loan you apply for and your credit.
    • Origination fees. You may need to pay a fee to borrow your loan, typically 1 to 3% of the loan amount.
    • Ongoing fees. Some personal loans may come with annual fees that will increase your ongoing repayments.
    • Late payment and non-sufficient funds fees. If you make a loan repayment late or fail to make a repayment you will be charged additional fees. Get in touch with your lender if you think you’ll be late with a repayment.

    Where can I get a personal loan to buy a car?

    There are a variety of lenders out there, and many of these offer personal loans that you can use to buy a car. Here are some of our top suggestions.

    • Online lenders. Online lenders are known for their speed and easy process. It typically only takes a few minutes to fill out an application, and you may be able to have funds deposited into your account by the next business day.
    • Banks. You might want to also look into your bank’s personal loan offerings. They sometimes offer discounts or simplified applications to members. Banks also tend to offer relatively low interest rates, though you’ll typically need good or excellent credit to qualify.
    • Credit unions. These nonprofit financial institutions work similarly to banks but typically offer lower rates and have less strict credit requirements. It can take a while to get your funds, however, and you’ll have to open a savings account to qualify.
    • Peer-to-peer (P2P) marketplaces. Online P2P marketplaces like LendingClub and Prosper connect borrowers with investors interested in funding their loans. Funding is typically quick and you can often get competitive rates.

    Compare loan offers now

    Is a personal loan right for me?

    To help yourself decide if a personal loan makes sense for your car purchase, try answering some of these questions:

    • Is my personal loan enough to cover the costs? In most cases, you won’t need to borrow a lot to purchase a car. But just in case, make sure you can borrow as much as you need with a personal loan before signing a loan contract.
    • Is a car loan an option? If you’re buying a car over 10 years old or has more than 100,000 miles on it, you could have trouble qualifying for a car loan to buy that vehicle. In this case, a personal loan may be one of your only options.
    • Can I get a better deal with a personal loan? Try prequalifying with a few personal and car loan providers — or at least reach out to ask what rates you can personally expect with each. This will show you which lending option can get you a better deal.
    • Is it important that I own the car? With a car loan, you don’t get the car title until you’ve made your last repayment. With a personal loan, you’ll own your car right away.
    • Does it fit my budget? Personal loans can sometimes come with shorter loan terms than car loans. While a short loan term means you’ll end up paying less in interest, they can also mean higher monthly repayments. Make sure you can afford the monthly repayments on a personal loan before applying.

    Bottom line

    Finding the right financing option comes down to costs, features and flexibility. Car loans can be great for borrowers who want to buy from the dealership. Personal loans tend to work better for those who want to wander off the beaten path by getting an older car or buying from an unconventional seller. They could be best for borrowers who’ve bought a car a before and know what they’ll need to purchase on top of the car itself.

    You can compare your personal loan options before applying, or if you think a car loan might be more your speed, read our guide on qualifying for a car loan.

    Compare loan offers now

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    US Personal Loans Offers

    Important Information*
    Even Financial Personal Loans

    Get connected to competitive loan offers instantly from top online consumer lenders.

    Prosper Personal Loans

    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

    LendingClub Personal Loan

    A peer-to-peer lender offering fair rates based on your credit score.

    SoFi Personal Loan Fixed Rate (with Autopay)

    No fees. Multiple member perks such as community events and career coaching.

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