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Personal Loans for Cars
16 Sep 2019

Personal Loans for Cars: Is It a Good Idea?

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Are you planning on purchasing a vehicle? In 2018, new-car dealers sold almost 15 million used cars in the US, according to the National Auto Dealer Association. If you’re looking for new ride, you are probably thinking of using personal loans for cars as a financing option.

A personal loan is one of the most desired ways to buy a car. We will show you how a personal loan is more flexible when determining a repayment structure.

As 44% of Americans utilize some type of loan to finance their vehicle, the type of loan you use if a pretty important choice.

Below is a basic guide on whether to take personal loans for cars.

Pros Of Personal Loans For Cars

Personal Loans Have no Limitations

When planning to purchase a car, there are several things to consider. One is the tough decision of the type of loan that is most suitable.

A personal loan provides a wide range of benefits. One is that a personal loan has no limitations on how one can spend the money. The loan can be used to buy the car in full or in part. By and large, the main agenda, which is to buy a car, is achieved.

When applying to this loan, one is not restricted to state how they intend to use. So one can plan for the money to fit into other personal needs as well. This is what makes it a personal loan.

But how is this advantageous? The loan can be used to buy the car. There will be a surplus depending on one’s credit score.

With a high credit score, one can qualify for an incredibly high loan amount. This means that after purchasing the car, the remaining amount can still be used for other activities.

For instance, if you are buying a car for your business, you will still have money to support the business. This eases of loan repayment.

You do not strain in any way from even after the huge expense.

Can Be Secured or Unsecured

The good thing with a personal loan is that it can be secured or unsecured. Most of the time, it is unsecured.

The lenders have no stakes in it. With the unsecured personal loan, one buys the car without surrendering it as collateral.

This means it can be seized in case of any difficulty in bad credit loan repayment.

Though it an expensive option, the unsecured personal loan has no pressure for payment. The tenure may be extended but still easy to repay the loan.

Secured personal loans are equally favorable. Here you have the liberty to give a property of your choice as collateral.

Anything of value such as houses, others give gadgets, will be accepted as collateral. This beats car loans where the only collateral that is taken is the car. This secured loan has a lower interest rate than the unsecured loan.

It means you get to repay the installment loan with lower interest. The secured loan is a sort of breakthrough if you have a poor credit score.

Unlike auto loans, there is a way to play with the terms and get a loan even with credit issues.


The flexibility of a personal loan means that the repayment structure can either be short-term or long-term.

Normally, the repayment structure for a guaranteed loan is stated in months. From 12, 36 or 72 months. Given these options, it means you have full control over your financial status.

Since you are well aware of your budget, your financial needs, and how comfortable you will be, the choice of the repayment structure is all yours. The way forward here is to use the interest calculated to determine the amount in total for the short-term and long-term structure.

While tapping into the flexibility option, always apply the 20% rule. This rule dictates that is you cannot afford 20% of the price upfront then do not take the loan.

This will lead you into a bad debt crisis.

Remember, repaying the personal loan no credit check in the shortest time means a lower cost while taking a long-term option will lead to greater expenses.

The longer the tenure, the higher the interest rate and vice versa. As well, the installments can be adjusted. For a car loan, there is no negotiation around the stated installments.

Nevertheless, this option makes the repayment process flexible and customizable to one’s financial needs.

Whatever option suits your financial need, always ensure that you are comfortable with the APR to avoid situations with the lender.

Easy To Obtain

When compared to car loans, a no credit check loan is easier to obtain. For one, if you have good relations with your banker, it is quite easy to get a personal loan to buy your car. If not, you can apply for a loan from suitable banks or institutional lenders.

Having done extensive research, you will use a lender that is convenient to work with. Today, there is also the option of direct lending. These options have increased the accessibility of personal loan.

Moreover, the process of application is less tedious. You only apply for the payday loan no credit check. Provide your drivers license or SSN. Then get guarantors to sign.

Your credit score is checked, and if the record is clean, then the loan is awarded. It is also easy because it can be organized through a phone call.

This process is easy as it does not require piles of documents. First, it is demanding to gather all the required documents. Document approval may also take a while.

The only parties involved are the debtor and the lender. Once the loan application is approved and the loan disbursed, one proceeds to buy the car.

With auto loans, the car owner has to go back to the lender to sign the car as collateral. This makes the personal loan easy to access.

Car Ownership

When you buy a car, ultimately, you want it to be yours.

The best personal loans offer this advantage. The car is your property, and there is no fear of repossession by the money lender.

A secured personal loan demands valuable items but not the car. With either of the options, the car buyer sorely owns their car. There is no situation for which lenders will seize the car as collateral.

This benefits you as a buyer since you manage the car and how it is used.  You can export it as you may wish. You can sell it in case you need to.

Even before the loan is settled, the car can be sold. Think of it this way. The longest tenure for a personal loan is five years while that of an auto loan in seven years.

For the personal loan, you own the car fully after purchasing it. But with the auto loan, the car is collateral for the entire repayment period of seven years.

Logically, the car loan puts more pressure because you also want to have the freedom to use the car as your own. But a personal loans grants that freedom right as soon after the purchase.

A Car Can Be Sold Off

Imagine a situation where one urgently needs a substantially large amount of money for an emergency. This could be uncertainties, such as loss of a job or an illness emergency that demands heavy capital.

Such scenarios that are unplanned for immediate demand solutions. For this, one considers either taking a loan or putting their assets on sale.

A loan will take longer to process. Borrowing from a friend may not work because most people do not have lump some cash idling somewhere in a bank.

Selling an asset such as a car is the only way to generate money in these urgent situations.

Taking a personal loan to purchase means you can have the car as your rescue when the need arises. Since the car is not collateral for the loan, it is possible to sell it immediately.

Car ownership through a personal loan provides the car as security in times of uncertainty.

Cons of Personal Loans for Cars

High Interest

The interest rate for personal loans no credit check depends on three things. Your credit score, the lender and the repayment period. If you have a fair to good credit score, you are likely to land a not-so-high interest rate on your loan. However, with a poor credit history, the interest rate can go up to 36% per annum.

Though the interest rate might differ across lenders, the rates are generally higher than those of a car loan. For most banks, the interest rate for a car loan range between 9% and 14% per annum.

Money lenders offer their rates within this range as car loans with the car as collateral. The interest for a personal loan can get as high as 20%, and the lowest it can get is 12% per annum.

Depending on the financial options at your disposal, a lower interest rate is more appealing. Using a calculator, compare the rates over the tenure periods. The longer the tenure then the price for the car becomes higher.

For someone working on a tight budget, the personal loan may not be the best option in the short-term and long-term. This is because the high interest makes car-buying expensive.

Borrowing More Than Is Needed

When taking an instant loan, one will likely borrow much more than they actually need.

Naturally, people borrow the highest possible amount they can. Either way, they are going to be in debt, and they are going to repay the debt. This applies to personal loans.

Particularly when taking a personal loan to buy a car, one factor in other expenses such as insurance and registration.

The personal loan should sufficiently cater for this and other expenses. Since there is no limitation, one is bound to take an unnecessary high loan. This may cause a financial burden.

A personal loan even offers the luxury to make changes to your car. The expenses attached to these are still on the loan. For example, one may want to add new paint. This is not necessary.

Some people go the extra mile to change the body. These luxury lure people into taking very huge loans.

On the contrary, car loans may be restrictive to the price of the car. Additionally, auto loans offer additional funds for registration and insurance expenses. This minimizes the car loan significantly.

So for the car loans, the amount borrowed is totally reduced to expenses that cannot be avoided. Therefore, a personal loan increases the chances of spending more than is needed to buy a car. This is likely to drive people into bad debts and poor credit scores.


A car bought through a personal loan is used as collateral, and this provides security of ownership.

Another pro is that one the car is bought, the owner has full control over the car. They can spray it and modify it as they please. In line with this, the car can be sold to promote the generation of income for loan repayment.

The disadvantages of personal loans for cars are relatively few. They include high interest and temptation to borrow lots of money.

Taking a personal loan, therefore, depends on one’s specific financial status. The budget dictates how affordable a personal or car loan may be.

However, the overall objective is to have the most affordable and convenient loan option. This means and has to compare each of the options side by side.

Always keep in mind that a car is a depreciating asset. The moment the car is bought, it starts to depreciate. One must thus take the best loan option available.

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