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Should I Buy a Car With a Personal Loan or an Auto Loan?



You can buy a vehicle with a personal loan, since they can usually be used for whatever you’d like. However, the interest rates with a personal loan aren’t the best, and they vary quite a bit. If your credit score isn’t great, it may be a better idea to go with a regular auto loan.

Using a Personal Loan for a Vehicle

Personal loans are offered by direct lenders, such as those from credit unions, banks, or some online lenders. Your credit score is a major factor in determining your eligibility for these loans, as well as the terms you qualify for. Major financial institutions tend to have higher credit score requirements for loan approvals. With a poor credit score, it’s difficult to get approved for a personal loan.

Typically, the interest rate for a personal loan can be anywhere from 5% to 36%. The length of these loans varies, too, generally lasting between one to five years (or 12 to 60 months). While some personal loans can be as long as 60 months, most only last for a couple of years. If you buy a car with a personal loan, it could mean high monthly payments that can be hard to manage.

The main reason personal loans have higher interest rates is because they aren’t secured by anything, unlike an auto loan that’s secured by the vehicle you purchase. However, this also means that there isn’t a lien on your car if you buy it with a personal loan. If you need to sell it before you paid off the loan, you can. But, even if you don’t have the vehicle anymore, you still have to pay off the loan eventually.

A big advantage of using a personal loan for a car is that there typically isn’t a down payment requirement. Many auto lenders require borrowers to provide a down payment – it’s been shown that borrowers that put down cash have a higher chance of completing the loan. Having a down payment is often referred to as having “skin in the game,” and it tells lenders that you’re willing to lay down your own cash.

Because there isn’t a down payment requirement, having a down payment doesn’t really improve your chances of getting approved for a personal loan – it’s mainly your credit score that direct lenders are concerned with. With car loans, having cash to put down can increase approval odds because you’re invested in the vehicle.

Using an Auto Loan for a Car

Should I Buy a Car With a Personal Loan or an Auto Loan?On average, auto loans are easier to get approved for because there are many types of lenders that work with all sorts of credit situations. Car loans are offered by many different types of lenders as well, such as direct lenders, third-party lenders, and the captive lenders of automakers.

Since there’s so much variety in auto lending, the rates and terms vary, too. A car loan’s interest rate can be anywhere from 0% to 20% (sometimes even higher). Auto loan terms vary as well, usually lasting anywhere from 48 to 84 months, depending on the price of the vehicle, the lender, and your personal situation. The better your credit score, the lower interest rates you can usually qualify for.

With a secured car loan, the vehicle is the collateral. This means if you default on the loan, the lender can hire a recovery company to repossess the car. A repo’d vehicle is usually sold at auction in an attempt to cover your remaining loan balance. This is very different from a personal loan, since the car and the loan aren’t tied to each other. You also can’t sell a vehicle with a lien on it until the loan is paid off, or you get a trade-in offer from a dealer or private seller that’s high enough to cover the loan balance.

While a car can be repossessed if you default on the loan, it also means that interest rates tend to be lower for auto loans than personal loans because the vehicle is collateral.

The biggest advantage of going for a car loan over a personal loan is that you’re likely to have a better chance of getting approved if your credit is worse for wear. There are many dealerships signed up with bad credit auto lenders all over the country. With a lower credit score, it can be difficult to find lenders that can assist you. However, subprime car loans from subprime lenders are reported to the major credit bureaus. If you qualify for subprime financing, you can improve your credit score with your on-time payments and get the vehicle you need.

Get Matched to a Local Dealership

Finding bad credit auto resources doesn’t have to be hard, especially with Auto Credit Express by your side! We make it easy to get connected to a dealer that’s signed up with subprime lenders. To get matched to a dealership in your area that has lending options for your credit, fill out our car loan request form. There’s never an obligation, and it’s completely free and secure. Get started now!

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Martin Lewis issues guidance on using credit cards to build ratings – best deals | Personal Finance | Finance



Martin Lewis regularly urges savers to use caution when utilising debt themed products but at the same time, he acknowledges the need for a decent credit rating to get by financially. Today, the Money Saving Expert was questioned by viewer Miranda on how one can build their credit rating in difficult circumstances.

“What I’d then like you to do is go and do £50 a month of normal spending on it, things you’d buy anyway.

“[Then] Make sure you pay the card off in full every month, preferably by direct debit so you’re never missing it because the interest rate is hideous.

“That way you won’t pay any interest.

“You do that for a year, you’ll start to build that credit history, showing them you’re a good credit citizen.

“Then you’ll be able to move into the sort of more normal credit card range.

“So, bizarrely, to get credit you need credit. What credit will you get? Bad credit, go get the bad credit just make sure it doesn’t cost you.”

Consumers of all kinds may not have the best options at the moment as recent analysis from revealed.

In mid-November, they detailed that a number of high street banks have cut the perks and interest on a number of their current account deals.

On top of this, the Bank of Scotland and Lloyds Bank made credit interest cuts of up to 0.5 percent.

Rachel Springall, a Finance Expert at commented on the few options consumers and savers currently have available: “Clearly, it is vital consumers decide carefully if now is the time to switch, but if they wait too long, they may well miss out on a free cash switching perk.

“At present, providers will be assessing how they can sustain any lucrative offers in light of the pandemic.

“With this in mind, we could well see more changes in the months to come and if this does indeed occur, consumers would be wise to review whether their account is still worth keeping.”

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Should you use a balance transfer to pay off debt?



Should you use a balance transfer to pay off debt?
Image source: Getty Images.

A balance transfer might be the solution if you have debts and want to gain control over your finances. But whether a balance transfer is right for you will depend on a number of factors.

Things to consider before using a balance transfer

The size of your debt

If you want to apply for a balance transfer credit card, be aware that most providers will allow you to transfer up to 90% of your credit limit.

Your credit limit will be dependent on your own personal circumstances, including your salary, your credit history and your residential status (homeowner or renter).

Be realistic about your debt. For example, if you earn £25,000 per year and you have a debt of more than £15,000, a balance transfer might not be cheapest way to pay the debt.

The time taken to pay the debt

The main advantage of a balance transfer credit card is that many offer an interest-free period on the balance. So, if you can pay off your balance in that period, you won’t accrue any further interest charges.

However, these periods typically range from 18 to 24 months, so if you think you will need more time to pay the debt, you may need to factor in additional interest charges when the interest-free period ends.

Whether or not a balance transfer is the right debt payment solution will depend on your personal circumstances. Check our balance transfer calculator if you want to work out how much a balance transfer could save you in interest payments.

Your credit score

The advantage of a good credit score cannot be underestimated in this situation.

When applying for a balance transfer credit card, the company will check your credit score. Based on this score, they could refuse your application.

Even if you are accepted, if you have a bad credit score they could reduce your credit limit. Ultimately, this will determine the benefit of a balance transfer as a suitable debt payment solution.

If you think your credit score might be a problem, it’s worth checking with the credit reference agencies before applying. That way you can avoid any nasty surprises.

There are three main consumer credit reference agencies in the UK. They are Equifax, Experian and TransUnion (Noodle).

Alternative solutions to balance transfers

You could still use a balance transfer even if the size of your debt is bigger than the credit limit.

Transferring part of the debt would enable you to benefit from any interest-free period, where applicable.

Alternatively, if you have multiple debts, you could consolidate all of your debts so that you can make a single regular payment. If necessary, you could do this using an unsecured personal loan over a period longer than 24 months.

Take home

Look at your own personal circumstances with a critical eye. Remember that you need to factor in living expenses when thinking about how long it will take you to pay off your debt.

Balance transfers are a useful method for debt repayment, but be aware that credit cards are an expensive way to borrow money. Take full advantage of any 0% deals wherever possible. Check out our list of the best 0% credit cards.

Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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Turn credit declines into a win-win | 2020-11-20



The pandemic has left millions of people needing credit at a time when lending standards are tightening. The result is a lose-lose situation—the consumer gets a bad credit decline experience and the credit union misses out on a lending opportunity. How can this be turned into a win-win?

The case for coaching

Let’s start by deconstructing the credit decline process: The consumer is first encouraged to apply. The application process can be invasive, requiring significant time commitment and thoughtful inputs from the applicant.

After all that, many consumers are declined with a form letter with little to no advice on actions the applicant can take to improve their credit strength. It is no wonder that credit declines receive a poor Net Promoter Score (NPS) of 50 or often much worse.

On the flip side, forward-looking credit unions provide post-decline credit advice. This is a compelling opportunity for several reasons:

  • Improved customer satisfaction. One financial institution learned that simply offering personalized coaching, regardless of whether or not consumers used it, increased their customer satisfaction by double digits.
  • Future lending opportunities. Post-decline financial coaching can position members for borrowing needs even beyond the product for which they were initially declined.
  • Increased trust. Quality financial advice helps build trust. A J.D. Power study noted that, of the 58% of customers who desire advice from financial institutions, only 12% receive it. When consumers do receive helpful advice, more than 90% report a high level of trust in their financial institution.

Provide cost-effective, high-quality advice

AI-powered virtual coaching tools can help credit unions turn declines into opportunities. Such coaches can deliver step-by-step guidance and personalized advice experiences. The added benefit is easy and consistent compliance, enabled by automation.

AI-based solutions are even more powerful when they follow coaching best practices:

  • Bite-sized simplicity. Advice is most effective when it is reinforced with small action steps to gradually nurture members without overwhelming them. This approach helps the member build momentum and confidence.
  • Plain language. Deliver advice in friendly, jargon-free language.
  • Behavioral nudges. Best-practice nudges help customers make progress on their action plan. These nudges emulate a human coach, providing motivational reminders and celebrating progress.
  • Gamification. A digital coach can infuse fun into the financial wellness journey with challenges and rewards like contests, badges, and gifts.

Virtual financial coaching, starting with reversing credit declines, represents a huge market opportunity for credit unions. To help credit unions tap into that opportunity, eGain, an award-winning AI and digital engagement pioneer, and GreenPath, a leading financial wellness nonprofit, have partnered to create the industry’s first virtual financial coach. To learn more, visit

EVAN SIEGEL is vice president of financial services AI at eGain.

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