Car loans and personal loans are both brilliant financing options when purchasing a car. The biggest difference between these two loan types lies in their usage. A car or auto loan is used solely for buying a vehicle, whereas a personal loan can be used to purchase anything.
The typical personal loan providers include credit unions, banks, and other large financial institutions. Car loans can come from various financing entities like credit unions, banks, online lenders, and auto manufacturers or dealerships with financing solutions.
In most cases, personal loans are unsecured and usually come with higher interest rates than auto loans, which are secured. Read on to find out if car loans are an attractive alternative to personal loans. You will also learn where to find the best “car loans near me.”
What Is a Personal Loan?
A personal loan is a type of unsecured loan that provides you with a lump sum of cash you can use at your discretion. This loan is ideal for big, one-time expenses, such as home improvement projects, weddings, vacations, or debt consolidation. Sometimes, personal loans can be secured against valuable items like a home or vehicle.
A personal loan could be the best option if you don’t want to make a down payment on your car and won’t mind a higher rate in exchange for money. In this case, the financing company will not place a lien on your vehicle, meaning you claim full ownership and can sell the car even before you complete your loan payments.
Interest rates and loan terms are the key aspects that impact the total amount paid on a personal loan. Since most personal loans are unsecured, they tend to have higher interest rates and strict credit eligibility requirements. Also, a cosigner may not be accepted when applying for a personal loan.
What Is a Car Loan?
A car or automobile loan is a type of loan used to fund the purchase of a new or used car. The vehicle serves as the security for the loan. When you don’t have enough savings to pay for a car, an auto loan can help. Once you take the loan, you agree to pay the money over a specified time, including the applicable interest and fees.
Meanwhile, the lender retains ownership of the vehicle until you complete your loan payments. If you are unable to pay the loan, the lender can repossess the vehicle and sell it. This helps reduce the loan risk for the lender. The amount and rate you get for your car loan will depend on your income, credit score, ability to pay the loan, and the financing company you choose.
Because car loans are secured by your vehicle, they tend to have lower interest rates than personal loans. They also have less strict qualification requirements and are easier to obtain, even with a horrible credit history.
Is a Car Loan an Attractive Alternative to Personal Loans?
Car loans offer many benefits over personal loans, so it is safe to say that they are a great alternative to personal loans. Here are some reasons why car loans are considered an attractive option:
- A car loan is the easiest way to finance a car – Given that the lender uses your vehicle as collateral, the loan is considered lower risk. For that reason, most lenders will be willing to offer the loan without a down payment. However, remember that making a down payment helps reduce your loan rate.
- Credit checks are not mandatory – Unlike a personal loan which requires you to have a great credit score, this is not a serious requirement with car loans. You can get approved for a car loan even if your credit rating is bad.
- No additional collateral required – You don’t need additional collateral other than your vehicle to qualify for a car loan. Your car will serve as collateral with the lending company, and if you default, the lender has a right to sell the vehicle to recover the outstanding loan amount. Advertisement
- Flexibility to negotiate interest rates – An auto loan allows you to negotiate the interest rates on your loan. This is especially true for borrowers with a strong credit rating and who have built a good relationship with the lender.
Where can I find car loans near me?
If you want to buy a new or used vehicle and looking for a reputable lender near you, search no further than Jacksonvilletitleloan.com. We offer the best car loans at competitive rates and flexible terms. Apply for your car loan today to enjoy our easy and quick application process, which takes only a few minutes to complete.