Mogo Personal Loan
Borrow up to $35,000
- Same day funding
- Free credit score + monitoring
- Complimentary fraud protection
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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 the pros and cons carefully before you apply.
Learn more about financing your new car with a personal loan in our guide below.
|Personal loan||Car loan|
|Cars you can finance||Any car||New and used cars – however there may be age and km limits|
|Collateral||None with an unsecured personal loan, usually your new car with a secured loan||Your new car|
|Terms||Usually one to seven years||Usually three to seven years|
When you have a personal loan, you can use the funds like cash — simply use the deposit in your bank account to finance your car purchase. 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 — but you might have to tell them 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 taxes, buy license plates and pay vehicle registration fees.
Loan terms can range between one and seven years, and you can generally borrow between $1,000 and $35,000, although some lenders will offer more. 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 your repayments.
Cedric has been saving up to buy a new car. He has his eyes on a Honda Civic which, with all the upgrades he wants, is priced at $23,000.00. He has $15,000.00 saved up, which means he will need a loan for $8,000.00. He has looked into car loans, but since he has an excellent credit score and wants to outright own his car, he opts for a personal loan from his bank. He is approved for the full $8,000.00 at a competitive rate of 5% with a loan term of 2 years. With a one-time origination fee of 3%, his choice to get a personal loan is still a better option for his needs and wants.
|Cost of new car||$23,000.00|
|Loan type||Personal loan|
|Interest rate (APR)||5.00%|
|Loan term||2 years|
|Additional fees||Origination fee of 3% ($240.00)|
|Total loan cost||$8,663.31|
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
While a car loan may be better in certain situations, personal loans offer a range of benefits to those looking to finance a vehicle.
Choosing a personal loan to finance a car has downsides as well. Here are some of the drawbacks to consider:
Here are three situations where you might benefit more from a personal loan than a car loan.
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.
Like all loans, personal loans will charge interest and fees. Before you apply for one, consider these factors when comparing your loan options:
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:
To help yourself decide if a personal loan makes sense for you, try answering some of these questions:
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 buy 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.
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