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

Buying a car with a personal loan

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

There are a few financing options you have to choose from if you want to buy a car. You might already have an idea which car loan would be best for you, but you may also want to consider a secured or unsecured personal loan.

Personal loans can give you different benefits to a car loan. Find out what they are in this guide.

Personal loans vs car loans

Personal LoanCar Loan
Cars you can financeAny vehicleNew and used up to a certain age
Pros
  • Flexibility with the car you want to finance
  • Range of loan options
  • Can use the funds for additional expenses
  • Designed to purchase a car
  • Can apply for higher loan amount
  • Competitive rates
  • Access to additional add-ons such as warranty
Cons
  • Higher interest rates than car loans
  • Personal eligibility requirements may be stricter
  • Restrictive on the type of car you can purchase
  • You can’t use the loan for additional expenses

Compare loan offers now

How does a personal loan work to finance a car?

Personal loans work in a very similar way to car loans, but have a few notable differences. You can request a loan for much more than the value of the car with a personal loan lender — car loans generally don’t allow this. You also don’t need to supply the vehicle details to the 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. Loan terms can range between one and seven years, and you can generally borrow between $1,000 and $50,000.

What’s the process to get a personal loan?

Compare your financing options

Rates last updated February 20th, 2018

Reveal your potential loan offers and rates

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

Let's get started

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
Even Financial Personal Loans
Get connected to competitive loan offers instantly from top online consumer lenders.
580
$100,000
From 4.99% (fixed)
LendingClub Personal Loan
A peer-to-peer lender offering fair rates based on your credit score.
660
$40,000
From 5.99% (fixed)
CompareFirst Personal Loans
An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
580
$100,000
From 2.99% (fixed)
Upgrade Personal Loans*
620
$50,000
From 5.66% (fixed)
Laurel Road Personal Loans
Get a personal loan with no application or origination fees and a rate discount for autopay.
680
$45,000
From 5.5% (fixed)
FreedomPlus Personal Loans
Consolidate debt and more with these low-interest loans. Cosigners welcome.
640
$35,000
From 4.99% (fixed)
Best Egg Personal Loans
640
$35,000
From 5.99% (fixed)
Prosper
Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
640
$35,000
From 5.99% (fixed)
LendingPoint Personal Loans
Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
600
$25,000
From 15.49% (fixed)
NetCredit Personal Loan
Check eligibility in minutes and get a personalized quote without affecting your credit score.
550
$10,000
From 34% (fixed)

Compare up to 4 providers

Rates last updated February 20th, 2018

Reveal your potential loan offers and rates

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

Let's get started

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 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.
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.
Good to excellent credit
Typically 1 to 7 years
Must be a US citizen and 18+ years old. Must have good to excellent credit.

Compare up to 4 providers

What are the benefits of using a personal loan?

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

  • Flexibility with approved funds. A personal loan is not tied to how much the car purchase is. Meaning, you’ll be able to borrow additional funds for insurance, modifications or even to consolidate other debt.
  • Buy a used car. While some car loan lenders only allow you to purchase a used vehicle under a certain age, you can finance any car you want with a personal loan. This includes classic vehicles and used cars over the age limit.
  • Range 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 a car loan.

Buying situations and financing options to consider

Not sure what type of finances best for you? Consider the following situations:

  • Buying a new car from a dealership. It may be better to use a car loan or dealership finance, unless you need more than the cost of the car. You’ll be able to get a competitive rate and may have access to more convenient features with dealership financing.
  • Buying a used car from a private seller. Depending on the age of the vehicle, you may be able to choose between a personal loan or a car loan. A personal loan may lend more flexibility in this situation if it’s an older car.

How much does a personal loan cost?

Personal loans come with a variety of fees and charges that should be considered before you apply:

  • Interest rate. This rate can either be fixed or variable and can range from 5% to 36% depending on the type of loan you apply for and your creditworthiness.
  • Origination fees. You may need to pay a fee to set the loan up — this is typically 1-3% of the loan amount.
  • Ongoing fees. Some personal loans may come with annual fees that will increase your ongoing repayments. Make sure to consider these when comparing your options.
  • 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. Make sure you get in touch with your lender if you think you’ll be late with a repayment to avoid these.

What are the drawbacks of 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.

How to decide what’s right for you

First, make sure the lender offers loan amounts that cover your car purchase. Then, consider the features that are available with each loan such as early payoff and refinancing, do these suit your needs? After this compare the costs of the most suitable loan options and select the most affordable on your budget.

Bottom line: Finding the right financing option comes down to costs, features and flexibility.

Compare loan offers now

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and our Privacy Policy.

US Personal Loans Offers

Important Information*
Even Financial Personal Loans

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

Prosper

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)

Borrow up to $100,000 with a competitive APR and no fees.

Go to site