When you need cash to buy a car, you’re often choosing between a personal loan vs auto loan. They both deliver installment payments, but their structure, cost, and risks differ in ways that matter. Below, I break down the tradeoffs with crisp data, side-by-side tables, a quick chart, and actionable rules-of-thumb so U.S. borrowers can pick the smartest path.
Quick summary
A personal loan vs auto loan choice comes down to flexibility versus price. Personal loans are usually unsecured and flexible (you can use the funds anywhere, buy privately, or finance an older car), while auto loans are secured by the vehicle, generally cheaper, and commonly available at dealerships.
personal loan vs auto loan comparison
| Feature | Personal loan | Auto loan |
| Typical purpose | Any (consolidation, private car purchase) | Vehicle purchase only |
| Collateral | Usually unsecured | Secured by the car |
| Typical APR (2025) | ~10%–36% (varies widely) | New car ~6–8%; used car ~8–14% |
| Terms | 1–7 years (common 36–60 months) | 2–8 years (many 60–72+ months) |
| Down payment | Usually none required | Often 10–20% recommended |
| Best when | Buying privately, older cars, or bundling costs | Buying new or certified used from dealers |
This table highlights the core differences readers need to weigh: interest, collateral, and where you can use the funds.
Rate reality: what the numbers show
Average car loan interest rates for new vehicles sit near 6–7% in 2025, while unsecured personal loans average roughly 12–15% for credit-worthy borrowers — and much higher for lower credit tiers. That spread translates into hundreds or thousands more in interest on an identical principal.
Simple bar chart (APR floor comparison):
APR %
LightStream (best PL) | █ 6.5
Auto loan (new avg) | ███ 6.9
Amateur personal loan | ██████ 14.5
Subprime personal | ███████████ 24+
Secured vs unsecured loans: why collateral matters
When looking at secured vs unsecured loans, remember that collateral decreases the risk to the lender. For example, an auto loan has collateral (the car), which allows borrowers to get a lower APR and extended repayment. Unsecured personal loans have to charge more because they are based only on your creditworthiness.
Use-case scenarios: when to choose which
- Buy new or certified pre-owned at a dealer: go with an auto loan, lower APR, and dealer incentives often apply.
- Buy from a private seller or an older car: a personal loan can fund the purchase without dealer paperwork.
- Need to combine other costs (repairs, registration, taxes): a personal loan gives flexibility.
- Credit is weak, but you have collateral: consider a secured auto loan or ask about credit unions, which often beat online offers.
yes, you can buy a car with a personal loan. Absolutely. Take special care to calculate the overall total cost of financing, as the convenience of a personal loan’s higher APR could outweigh the benefit of just using the auto loan.
Personal loan vs auto loan: Repayment mechanics and risks
Loan length and payments matter. Longer auto loan terms reduce the monthly burden but increase total interest and risk of negative equity. If you default on an auto loan, the lender can repossess the car. Personal loans don’t risk your car (unless you secured the loan), but they demand stronger credit to get a favorable rate.
Table: Example monthly payments (approx., 36-month term)
| Loan amount | Auto loan @7% | Personal loan @14% |
| $10,000 | $308/mo | $325/mo |
| $20,000 | $616/mo | $650/mo |
Over longer terms, the gap widens. The secured auto loan typically saves money.
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Other items to factor
- Loan down payment expectations differ: dealers often expect 10–20%; personal loans typically have no down payment.
- Loan collateral: when you finance via an auto loan, the vehicle secures the note — that’s why rates are lower.
- Eligibility: Personal loans rely more on credit score and DTI; auto loans are easier to approve because of collateral.
- Use a car loan vs personal loan calculator before signing it, to help quantify monthly payments and total interest.
Practical decision checklist
- Get prequalified quotes for both vehicle loans and unsecured personal loans (soft pulls).
- Compare APR, fees, and term length; calculate total interest.
- Consider dealer incentives (0% promos) or credit union offers that may beat online rates.
- If buying privately, factor in seller preferences and title transfer timing.
- If you want simplicity and speed, compare instant offers on aggregator sites like findcreditloan.com to see side-by-side options before a hard pull.
Wrapping it up
One thing to consider when weighing the pros and cons of a personal loan vs auto loan is thinking about the flexibility vs cost. Personal loans will usually win for private sales, or older cars, or if you want to bundle everything into one, but auto loans typically provide the lowest cost for vehicle purchases in the long run, as they are a secured loan and offer better car loan interest rates. Do your math with a loan calculator, review resourse with the lenders, and select the loan that costs you the least in total interest and accommodates your monthly budget!