Before settling on an auto loan or a personal loan, it’s always best to compare the offers you get from multiple lenders. Rates, terms and specific details can vary between banks, so it helps to have a handful of offers to choose from. And if you can’t decide between a car loan or personal loan, consider looking into both options to see what you can get.
You can compare your loan options at banks, credit unions and even some car dealerships that have their own financing options. Here are a few things to consider with auto loans and personal loans before driving your new car off the lot.
Like any major purchase, buying a car requires a bit of your time and effort.
Aside from finding the right vehicle, it’s important to find the right financing options.
Before securing a loan for your new car, ask yourself a few questions regarding your financial situation. Here are a few things to consider:
- Down payment. Are you willing to put any money down up front? If so, how much will you pay?
- Credit. Is your credit score high enough to qualify for a low interest rate? If you have a low score or short credit history, you may not qualify for certain personal loans.
- Collateral. If you use an auto loan, the vehicle serves as collateral for the lender. If you use a personal loan, you may need to use something else to guarantee the lender, like your home.
- Loan term. How long do you need to pay off the car?
- Flexibility. Do you plan to use any remaining funds from a loan for other purposes? Auto loans are generally written only for the cost of the vehicle, while personal loans can be in higher amounts.
- Application method. Online applications for personal loans are extremely common and you can have the loan in just a few days (or even hours, depending on the institution), while car loans are generally applied for in person.
Whether you decide to choose for a personal loan or a car loan, keep in mind that rates and deals may vary even between institutions, so look and ask around before choosing a loan. Be sure to check banks, credit unions and even online platforms.
It also helps if you outline a designated amount of time for you to shop around. If you rush into your purchase, you risk losing out on lower interest rates or better loan terms. You should budget in a few days (or more) for comparing offers from a variety of lenders.