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Buying a car with a personal loan is less popular, but it has advantages. (iStock)
Whether to consolidate high-interest debt or to help with major purchases like a car, a personal loan can be a convenient option. Personal loans are the fastest growing type of consumer debt, according to Experian, with 11 percent of American consumers having personal loans averaging $ 16,259.
Personal Loans are just that – loans for all types of personal use. These loans can come from a bank or other credit institution that allows you to borrow a set amount of money that you pay back. These monthly payments are used for both the original balance and the interest you will be charged on the personal loan.
In order to get a personal loan, you need to do some research. You may have seen these offers in the mail or email inbox that entice you with offers for an easy application process, great prices and terms. Compare prices carefully to make sure you can get the best credit to you. Use a website like Credible to pre-qualify for credit from 1,000 to $ 100,000 in just two minutes. You can compare prices side by side without affecting your creditworthiness.
9 OF THE BEST PERSONAL LOANS IN 2020
So you have a new or used car in view that you want to buy. A classic car loan from the car dealer is not the only way to finance the car. In fact, depending on the situation, it may even make more sense to take out a personal loan. While this is less common with only about 4 percent of car buyers using a personal loan on their purchase, it can be a viable option.
The first step to getting a personal loan is fill out an application to start the qualification process. The lender will carefully review your income, professional history, and credit history to determine if you are getting a loan and at what rate. The lower the interest rate, the less you have to pay back in the long run.
Some tips for getting the best interest rate contain:
- Check with the credit institution you already have a relationship with
- improvement Your creditworthiness
- Use of collateral
- Choosing a shorter term
Most people don’t enjoy the finance haggling that comes with financing a car direct from the dealer. Stepping into the showroom already knowing that you have the funds to pay for the car through a personal loan can make the process a lot easier and give you a little more power when it comes to calculating the price of the car .
Whether you go for a car loan or a personal loan, it is important that you stay within your budget. To find out your approximate repayment cost, try one Online personal loan calculator for peace of mind and Use Credible to see which plans you qualify for.
CAN YOU GET A PERSONAL LOAN WITHOUT A CREDIT CHECK?
Car loan vs. personal loan
One of the main features that differentiate personal loans from auto loans is that personal loans are unsecured. While your car can be repossessed if you fail to repay a car loan as agreed, there is no asset associated with a personal loan. However, because an unsecured loan is risky, personal loans often have higher interest rates.
A car loan has restrictions on the type and age of the car you buy. With a personal loan, there are no restrictions on what the money can buy. You can also buy the car with a personal loan and if there is any money left you can spend it however you want.
EVERYTHING YOU NEED TO KNOW ABOUT A PERSONAL LOAN
Unlike car loans, personal loans often come with prepayment penalties and fees.
When taking out a personal loan to buy a vehicle makes financial sense
- If you are buying a car direct from the owner rather than the dealer, a personal loan is likely the only way to go. Without the help of a local finance department, you will have to raise the money for the vehicle yourself.
- You want to own your car right away. With a private loan You own the car completely without having to wait for the final payment to be made like with a car loan.
HOW TO FIND THE BEST PERSONAL LOAN FOR YOUR NEEDS
- There is no limit on a personal loan when you want to buy a much older car. With some car loans, you can only buy a used car if it is under a certain age. This usually excludes the classic car enthusiast looking for a 1969 Pontiac GTO.
- You want cheaper insurance. With personal loans, you are not required to have full coverage and can look for a cheaper policy.
Why a personal loan may not be the way to go for this type of purchase
- If you want the cheapest prices on your car purchase, a car loan may be the way to go. Their rates are often more competitive because it is a secured loan.
- With an unsecured personal loan, credit plays an even bigger role. It can be more difficult to qualify for a personal loan when you have many shortcomings on your credit. If you get the loan with credit default, you will likely pay a much higher interest rate.
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