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.

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.

Prosper

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 12–84 monthsTypically 36–84 months
    Pros
    • Finance any type of car
    • Lots of different loan options
    • Can use funds for additional expenses
    • Own your car fully right away
    • No deposit required
    • Designed specifically to help you buy a car
    • Larger loan amounts sometimes available
    • Competitive rates
    • Access to add-ons like a warranty or insurance
    • Easier to qualify with less-than-perfect credit
    Cons
    • Rates are sometimes higher than car loans
    • More difficult to meet requirements
    • Expensive if you have poor credit
    • You have to get insurance yourself
    • Restrictions on the type of car you can buy
    • You can’t use it to cover additional expenses
    • You don’t own your car until you pay ff your loan
    • Deposit usually required upfront

    Compare loan offers now

    How do personal loans work with buying 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 June 22nd, 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 Max. Loan Amount APR
    Best Egg Personal Loans
    A prime lender with multiple repayment methods.
    640
    $35,000
    5.99%–29.99% (fixed)
    Upgrade Personal Loans*
    Affordable loans with two simple repayment terms and no prepayment penalties.
    620
    $50,000
    5.96%–35.97% (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
    15.49%–34.99% (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)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    740
    $100,000
    6.199%-15.365% (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)
    Prosper
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    640
    $40,000
    6.95%–35.99% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    680
    $45,000
    5.5%–11.74% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    4.99%–29.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    5.98%–35.89% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    580
    $50,000
    2.99%–36% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    300
    $30,000
    16.05%–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% (fixed)

    Compare up to 4 providers

    Rates last updated June 22nd, 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.
    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.
    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.
    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 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.
    • Wider 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.

    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 using a personal loan.
    2. You want to buy an older car. Vintage collectors or 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.
    3. You can qualify for a lower interest rate on a personal loan. Though personal loans typically come with higher rates because they’re unsecured, there are some situations where you might actually get a better deal on a personal loan than a car loan. That’s because car loan providers and personal loan providers consider different factors when they look at applicants.

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

    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.

    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.

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

    Most lenders offer personal loans that you can use for any legitimate purpose — including buying a car. When searching for a personal loan to buy a car, you might want to look at the following types of lenders.

    • Online lenders. Need those funds in a hurry? Can’t be bothered with a long application? Online lenders are known for their speed and ease. It typically only takes a few minutes to fill out an application and you can sometimes have funds deposited into your account within one 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 similar 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.

    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.

    Is a personal loan right for me?

    To help yourself decide if a personal loan makes sense for your car purchase, ask yourself the following questions.

    1. Is my personal loan enough to cover the costs? It can be difficult to qualify for a personal loan over $50,000 unless you have excellent credit. Make sure you can borrow as much as you need with a personal loan before you decide to take one out.
    2. Is a car loan even 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, personal loans are one of your only options.
    3. 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.
    4. Is it important that I own the car right away? 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.
    5. 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 that want to buy from the dealership in a streamlined process or have mediocre credit. 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.

    Want to learn more about car loans or personal loans? Check out our guides to read about how car loans or personal loans work and to expect if you apply.

    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

    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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