Personal loan or Car loan?

You can’t lead an active lifestyle in a modern world without a car. The huge and never-ending demand made car loans the second most popular type of loans in the USA. There are dozens of sub-types for car loans with a variety of terms for borrowing money with the purpose of buying a vehicle (whether for private or commercial use). The question is whether the car loan is really the best possible option, or there are offers you should take into account when choosing your lender?

For instance, in some circumstances, people prefer getting a personal loan rather than a car loan, and there are several reasons for that. Let’s take a closer look at all pros and cons of both types of loans.

“Pro arguments” for a Car loan

If you are a trustworthy borrower with an extensive credit history, you will definitely be offered beneficial terms on a car loan by any lender. For reasonably low interest rate you should better provide the bank (or non-bank lender) with collateral, as secured loans are always cheaper than unsecured ones.

  • The interest rate for car loans is fixed and usually lower (from about 5%and up to 22%) than the interest rate one can get for a personal loan.
    Fixed interest rate is great for one reason – a borrower can budget his payments easily, without getting unpleasant “surprises” from the bank if the lender decides to raise the cost of a loan.
  • Collateral that is required for a car loan could be in a form of a new car that is the subject of the loan. In this case the car must be insured to protect the interest of the lender in a case of a car’s damage in an accident.

Car loan  

In short – car loan is often provided on better financial terms compared to a personal loan, as this loan has an exact purpose and a lender is protected 100% by collateral.

“Pro arguments” for Personal loan

  • It’s much easier to qualify for a personal loan, as a lender has much softer requirements to borrowers’ eligibility. Basically, you can get a personal loan having a bad credit and a low score, just by paying a higher interest rate for that.
  • Personal loan doesn’t limit you in terms of a purpose of the loan. You can spend money on whatever you wish to, including the can (new or a used one).

Personal loan

  • Personal loan can be secured and unsecured, so even having no collateral you still can get a personal loan and by any car.
  • Personal loan doesn’t require putting your car as collateral, and so you are not obliged to insure the car on terms you are not ok with.
  • You may choose between a fixed and a variable interest rate, while a car loan implies you can only get a fixed interest rate. Variable interest rate provides borrowers with greater freedom, at the rate follows the economic situation, inflation and other parameters that make % more fair and adjusted to an economic reality.

Where to get the best terms for a car loan?

U.S Bank

U.S Bank

The bank offers highly competitive car loan’s terms with customized options. There is a big advantage U.S. Bank provides borrowers with: unlike other lenders, the bank doesn’t automatically increase interest rates for loans that are purposed for buying used cars. It only charges borrowers with the penalty (in a form of a higher interest rate) if the car is older than 6 years and “ran” more than 100 000 miles.

MyAutoLoan

MyAutoLoan

This is the service that connects lenders with potential borrowers, so here you will find and compare the most beneficial car loan terms. Just put the exact parameters of the loan you want to get and find the list of suitable lenders immediately!

LightStream

LightStream

The branch of a SunTrust bank specializes in car loans both for new and used cars, offering great options and low interest rates for borrowers. This lender promises to give anyone the best terms, and if someone will find a lender with better terms, LighStream promises to beat that offer and get your loyalty through that. Take a note, you have to have a really good credit score and a credit history to qualify for LightStream’s loans, but your efforts will pay off!

Where to get the best terms for a personal loan?

Wells Fargo

Wells Fargo

This well-known U.S. bank offers one of the lowest Annual Percentage Rate (from 6.25%) for individual borrowers. Having an excellent credit score one can borrow up to 100.000 dollars with the fixed or variable interest rate. Bank does not charge origination fee and doesn’t have penalties for a preterm loan’s repayment.

Prosper

Prosper

This is an online lending platform for connecting lenders and borrowers who search personal loans with the specific criteria. The whole online system is extremely easy to use that allows borrowers find lenders in a blink of an eye. Anyone with whatever bad credit can find borrowers who are willing to grant a personal loan on highly favorable terms (that would be impossible to get in a bank).

PersonalLoans.com

PersonalLoans

What is great about this online platform that it allows anyone find dozens of offers, based on preferred parameters: the sum of the loan, Interest rate, terms of repayment. No bank would ever provide potential borrower with such a variety of choice, so we consider this service as the best one for finding a lender.

Summary: If you are going to buy a new car, it is obviously better to get a specific car loan, where the interest rate and other terms are favorable. In a case of a second-hand car, you should opt for a personal loan, especially if your credit score is not that high to qualify for prime terms of a car loan.