Editor's choice: Carvana
- Most credit types welcome
- 45-day preapproval
- Seven-day guarantee
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When you’re looking to buy a new car, part of your research process always involves determining what type of loan you should get. By comparing loan amounts and interest rates between car loans and personal loans, you can get a good idea of how much a loan will cost. Both have their benefits, so weigh your options carefully before committing to a lender.
Both personal loans and car loans can be used to finance a new or used car. Your choice should be based on your needs, your expectations for the future and the car you’re looking to buy. But no matter which you choose, carefully read the terms and conditions attached to each loan to decide if it’s right for you. Not all car loans fund the same thing, and the terms of personal loans can vary widely.
Before you get started, ask yourself these five questions:
At the end of the day, the most effective way to compare loans is by looking at specific options side by side. Using a calculator can help you determine the exact value of each loan, and comparing loans by the annual percentage rate (APR) should give you the most accurate look at the final cost of your loan options.
The exact terms of your loan depend on the lender you choose. However, most lenders don’t stray too far from the beaten path. Your loan will likely have many of these features:
Personal loans are considerably more flexible than car loans. Not only can you find them just about anywhere – online, at your local bank, at credit unions – but they can also have low interest rates without you having to put up collateral. Of course, you’ll still have to compare quite a few options, which can take time you don’t have if you need a car right away.
Car loans are designed to cover the cost of a car and related expenses like licensing and registration. You can access a car loan from a dealership, a bank or an online lender, whichever is more convenient for you.
The following steps should help you find a loan that works for you. Use these steps as a guideline; your unique financial situation will impact the exact loan terms and amount you qualify for.
Deciding between a car loan and a personal loan can impact your finances for years to come. It’s a big decision, and the right choice will depend on what you want out of a lender. You should read up on your personal loan options and review how car loans work before settling on a loan.
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