Personal Loan to Buy a Car

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Personal Car Financing

If you have decided that you want a personal loan to buy a car, use Acorn Finance to secure a loan that is right for you. From the comfort of your own home you can check personal loan offers. Acorn Finance has a network of top national lenders that can offer some of the most competitive personal loans.

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Learn More About Personal Loan to Buy a Car

Personal loans can be used to buy a car. If you are making an inexpensive or private party purchase, a personal loan may be a good option. In most cases, a traditional auto loan will make the most sense but there are plenty of scenarios where a personal loan may work. Auto loans often have strict guidelines and requirements that you may not meet. Keep reading to learn more about using a personal loan to buy a car.

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Can you get a personal loan to buy a car?

Yes, of course, you can use a personal loan to purchase a car, but do you want to? It really depends on your situation. There are many circumstances where using a personal loan to purchase a vehicle makes more sense than using a traditional car loan. For example, if you are looking to purchase a vehicle from a private owner. Sometimes it may be hard to get a bank or lender to loan out a car loan for a used car that is not purchased through a dealership. Maybe you are looking to buy a used vehicle from a family member and the bank does not wish to get involved, or you do not want to get the bank involved. By using a personal loan, you can get the upfront cash that you need to pay the private owner, and then simply pay back the lender for the personal loan. This takes the risk away from the previous owner who can then rest easy knowing that they do not need to collect payments, and it makes it easier for the purchaser to simply pay off the car by making monthly payments directly to the lender.

Another circumstance where a personal loan would be better than a traditional car loan is if you are purchasing a classic muscle car that is to be a project car. It may not be running, it may be over 40-years old, it may need some significant work before any value can be recouped. If this is the case, many banks and lenders will not want to loan out a car loan to pay for the vehicle purchase. If you default on the loan, then how does the bank recoup their money. Also, it is very difficult to quantify the value of a classic car, especially if it is still in need of work.

Last, maybe you do not want to get the bank involved in a car loan because you do not want to use the vehicle as collateral for whatever reason. Maybe this is your only mode of transportation and money is tight right now and any interruption to reliable transportation may put your job at risk. A risk that you cannot afford. For this, if you can qualify, a personal loan may be a better option so that you can get the money you need to purchase the vehicle, make the monthly payments, and if for any reason you become in danger of default, you will know that at least your vehicle can not be repossessed, leaving you without transportation, and potentially without a job.

What credit score do you need to get a personal loan to buy a car?

If you are looking for a traditional car loan, you may want to have a credit score of 660 or higher. If you are looking for a personal loan to purchase a new used vehicle, your credit score may not need to be as high. Although it is important to try to have the best credit score possible in order to qualify for lower interest rates and other favorable terms, you may still be able to get a personal loan to purchase a vehicle with a credit score as low as 580. Depending on the lender, minimum credit score requirements vary. While many lenders may still require a higher credit score, some lenders are willing to work with borrowers with credit scores around 610, 600, or even as low as 580. The catch is, the lower your credit score, the higher the interest rate you will be required to pay. But, if you are someone in dire need of a vehicle to get to work, pick up your kids, and grocery shop, then you may be ok with paying higher interest if you are able to take care of your immediate transportation needs.

Is a personal loan cheaper than car finance?

The short answer is no. Most often, since the car being financed is being used as collateral to secure the car loan, interest rates may be lower when compared to the interest rates of a personal loan for someone with the same credit score. If you are looking for the cheapest way to finance a vehicle, then it is recommended that you apply for a traditional car loan to finance your new vehicle purchase. But, as we discussed before, this may not be the most logical course of action for people in certain situations. Sometimes it may be worth paying a little higher APR in exchange to not use the vehicle as collateral, to finance a private owner vehicle purchase, or to buy your dream project car.

Why shouldn’t you get a car on finance?

Financing usually comes with added expense. If you only qualify for high interest rates, you may want to consider paying cash for a vehicle, if you have the cash available. Another reason you may not want to finance a car is if you are unsure about affording the monthly payments. In some cases, you may be better off to save up and purchase a vehicle for cash rather than use financing. However, financing may allow you to purchase a safer and more reliable vehicle that will last longer. This may help consumers justify the added expense of financing.

How much can you take out for a personal loan to buy a car?

With any personal loan there are limitations. Typically, personal loans are no larger than $100,000, meaning, you can borrow any dollar amount up to that point. The question is, do you really want to purchase a new vehicle that is $100,000. Additionally, you will only be able to qualify for up to a certain amount for a personal loan based on your credit profile. It may be in your best interest to pre-qualify for a personal loan before you begin vehicle shopping. ONce you pre-qualify, you will know exactly how much you can budget to make your vehicle purchase. Not only will you know your budget, but you will also know what kind of interest rate you may qualify for as well.

What are the advantages of getting a personal loan to buy a car?

The main advantage of using a personal loan to buy a car is that you will not involve a bank in any decisions about how the money is spent, you do not need to use the vehicle as collateral, and you can pre-qualify before car shopping to create a budget. Additionally, if you are looking to purchase a vehicle that a lender may be wary of financing, like a classic project car, you can still get the money you need to make the purchase with no issue.

What are the disadvantages of getting a personal loan to buy a car?

The number one main disadvantage of using a personal loan to buy a car is that most often you will pay a higher interest rate than if you use a car loan. Car loans typically come with lower interest rates because the car is used as collateral on the loan. If for any reason you become in default, the bank or lender then has the right to repossess the vehicle in order to recoup as much of the original loan amount as it can.

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

Before securing a personal loan to buy a car or any other reason, you should compare offers. Most banks, credit unions, and online lenders offer personal loans for vehicle purchases. However, it may be harder to compare offers between banks and credit unions. Online lenders are very competitive within the personal loan space. At Acorn Finance you can access offers from top national lenders without impacting your credit score. Within 60 seconds or less you can get prequalified and compare offers.

Can you use a personal loan for a down payment on a car?

Personal loans are a popular choice for financing many different types of purchases because they don’t typically come with any restrictions. Therefore, a personal loan can easily be used for a down payment on a car, as well as to cover the entire purchase price of the vehicle. However, personal loans often have higher interest rates compared to car loans. If you need a down payment for an auto loan, taking on more debt may impact your auto loan. While you can use a personal loan for a down payment on a car, it may be a smarter financial decision to save up enough cash for a down payment.

What’s the difference between a car loan and a personal loan?

The biggest difference between a car loan and a personal loan is collateral. Auto loans are backed by the vehicle. If you default on an auto loan, the lender can repossess the vehicle. Since an auto loan is backed by collateral it can be easier to qualify for. However, there are more factors to consider such as the actual cash value of the vehicle versus the loan amount requested.
Personal loans on the other hand typically do not require collateral. In most cases they are approved based on a borrower’s creditworthiness. If you’re purchasing an inexpensive vehicle from a private party or an older vehicle that does not qualify for an auto loan, a personal loan can be a smart alternative for financing. But keep in mind that auto loans usually have lower interest rates.

How long should you typically finance a car for?

Choosing how long to finance a vehicle is most often a matter of personal preference.
Repayment periods for personal loans can be anywhere from 1 year to 84 months, while the average repayment period for a vehicle loan (such as from the dealership) is 6 years (or 72 months).
Keep in mind that the shorter your loan term is, the more you can save on interest charges. On the other hand, by extending the repayment term you can reduce your monthly payment. When choosing a repayment term, monthly payment is critical, but don’t forget to take total loan cost into account.

Can you pay off a personal loan for a car early?

If you’ve recently taken out a personal loan to finance a new car, you may be wondering if it’s possible to pay off the loan early.

The good news is that most personal loans do not have any prepayment penalties, so you’re free to make extra payments whenever you want. In fact, paying off your loan early can save you money in interest charges.

To do this, simply calculate your loan’s amortization schedule and then make additional payments that are equal to the amount of one monthly payment. Doing this each month can allow you to shave months off of your loan term and save money on interest charges in the process.

How do you qualify for a personal loan for a car?

While the exact qualifications for a personal loan will depend on the lender and the loan program, there are a few basic requirements for consumers to keep in mind when applying.
Applicants will have the best chance of qualifying for a personal loan if they have a “prime” credit score of 660 and above. Although personal loans are still available for those with credit scores below 600, those with higher credit scores will also be able to access lower interest rates than those with low credit.
In addition, lenders typically want to see that you have a stable income and an acceptable debt-to-income ratio. Some lenders have minimum income qualifications that borrowers must meet in addition to minimum credit scores.
Credit unions and online lenders tend to be more lenient with their application requirements than traditional banks, so be sure to consider alternative lenders in your search for a personal loan or a vehicle loan. Credit union membership is typically based on your place of residence or employment, while online lenders are usually available to applicants in all 50 states.

What is an average car payment?

Your total monthly cost will depend on a variety of factors including the age and type of car, the interest rate, and your loan term.
The total cost of cars has been rising in recent years and so has the average monthly car payment. As of 2021, the average car payment was $644 for a new vehicle and $488 for a used one. For a leased vehicle, consumers can expect to pay an average of $531 a month.
The average loan term is approximately 6 years (or 72 months) while leases typically last around 3 years (36 months).
When determining how much vehicle you can afford, don’t forget to factor in the monthly costs of maintenance, fuel, and insurance as well as taxes and annual registration fees.

What is a good interest rate on a loan for a car?

The interest rate you receive on your car loan will depend on a few factors including the age of the vehicle, the lender, the type of loan you choose to take out, and your credit score.
However, applicants with good credit can expect to receive an average interest rate of just over 4% on a new car and nearly 9% on used car financing.
On the other hand, interest rates on personal loans run around 9.5% on average.
It is important to keep in mind with both loan options that the higher your credit score is – the lower your interest rate will be. Be sure to improve your credit and shop around for the best deal in order to save the most money in interest over the lifetime of your loan.

What should you consider before getting a personal loan to buy a car?

Before applying for a personal loan to buy a car, there are a few things applicants should keep in mind.
Borrowers should always shop around and compare different loan offers before selecting a lender. This process allows shoppers to compare interest rates, fees, and other loan terms.
In order to find the best deal on a personal loan, consider getting prequalified from a few different lenders through an online portal like Acorn Finance.
Be sure to compare the estimated costs of both a personal loan and a vehicle loan for your unique situation to see which option saves you the most money overall. Auto loans may be easier to qualify for and are typically cheaper and easier to obtain.
No matter which type of financing you choose to select, always make sure that the total cost of the vehicle and its monthly payment is one that you can safely afford to repay.

Can you get a personal loan to buy a car?

Buying a car is a big purchase, and for many people, it’s one that requires financing. If you’re considering taking out a loan to buy a car, you might be wondering if you can get a personal loan for this purpose. The answer is yes, you can use a personal loan to finance the purchase of a car.

Although most people opt for traditional auto loans to fund these purchases, personal loans make sense for situations in which traditional auto loans might not work, such as if you’re buying a project car that you want to fix up.

What credit score do you need to get a personal loan to buy a car?

To qualify for a personal loan you should have a credit score of at least 610 to 640. Minimum credit score requirements can vary by lender. Your credit score can impact the amount you can borrow.

Closing Thoughts

If you have decided that you want a personal loan to buy a car, use Acorn Finance to secure a loan that is right for you. From the comfort of your own home you can check personal loan offers. Acorn Finance has a network of top national lenders that can offer some of the most competitive personal loans.

Get prequalified for a personal loan to buy a car. . . check offers today!

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