Can you use a personal loan to buy a car?

Core Insights - Personal loans can be used to buy a car, but they are generally not the most cost-effective financing option compared to auto loans [1][7] - Auto loans typically offer lower interest rates and better terms, making them a more affordable choice for vehicle purchases [4][5][7] Personal Loans Overview - Personal loans are installment loans that can be used for various purposes, including car purchases, with fixed interest rates and repayment terms usually between five to seven years [2][6] - Most personal loans are unsecured, meaning no collateral is required, but lenders assess the borrower's financial profile, including credit and income [2][3] Auto Loans Overview - Auto loans are secured loans specifically for purchasing vehicles, using the car as collateral, which often results in lower interest rates and less stringent eligibility requirements [4][5][6] - Interest rates for auto loans are generally lower, with an average rate of 7.64% for a five-year loan compared to 11.14% for a two-year personal loan [7] Comparison of Loan Types - Personal loans may have higher interest rates, shorter repayment terms, and stricter borrowing requirements compared to auto loans [8][10] - Auto loans may require a down payment, while personal loans typically do not, but this can lead to owing more than the car's worth if not managed properly [10] Situations Favoring Personal Loans - Personal loans may be suitable for purchasing older cars or those with high mileage that do not qualify for traditional auto loans [1][10] - Borrowers with poor credit may find personal loans more accessible than conventional auto loans, although they may face higher rates and fees [10]