APR 5.99% – 35.99%·$100 – $50,000

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Head to head

Personal loan vs auto loan.

Auto loans are secured by the vehicle and almost always carry lower APRs than unsecured personal loans, but they come with repossession risk and require the lender to approve the specific car. Personal loans are faster, more flexible, and better for certain purchase situations - particularly private-party used cars and older vehicles that don't qualify for auto financing.

Side by side

Personal loan vs Auto loan

AttributePersonal loanAuto loan
CollateralNone (unsecured)The vehicle (lender holds title until paid off)
APR range (700 FICO)8% to 20%5% to 12%
Repossession riskNoneYes - lender can repossess without court order on default
Vehicle age restrictionsNone - funds can buy any car, any ageMost lenders restrict to vehicles under 10 years old and under 150,000 miles
Private-party purchaseWorks for any seller (private party, dealer, auction)Some lenders exclude private-party sales or require extra steps
Loan amounts$1,000 to $50,000$5,000 to $100,000+
Time to fundNext business day (unsecured)Same day at a dealership; 1-5 days for direct lenders
Credit checkSoft pull for pre-qualification, hard at acceptanceHard inquiry to approve
Origination fee0% to 8%None (dealer may add dealer fees)
Best forPrivate-party purchases, older vehicles, borrowers avoiding repossession riskDealership purchases of newer vehicles where the lower APR justifies secured lending
Verdicts by scenario

Which wins, when.

  1. 01

    Buying a 3-year-old car from a dealer

    Winner: Auto loan

    Auto loan APRs are 3-8 points lower than personal loans for similar credit. At a dealer, the auto loan is also faster and simpler to process.

  2. 02

    Buying a 12-year-old car from a private seller

    Winner: Personal loan

    Most auto lenders reject vehicles over 10 years old or 150K miles. A personal loan has no vehicle restrictions and works for any private-party transaction.

  3. 03

    Borrower wants no repossession risk and can absorb a higher APR

    Winner: Personal loan

    With a personal loan, the lender cannot repossess your car if you default. The APR premium is the price for that protection.

  4. 04

    Buying at auction where title is delayed

    Winner: Personal loan

    Auto lenders typically need a clear title before funding. Personal loans fund without the title, which is essential for auction purchases where titles transfer slowly.

Common questions

Frequently asked.

Is it always cheaper to use an auto loan?+

Usually yes, but not always. Auto loans carry lower APRs because they're secured by the vehicle. However, if you're buying an older vehicle that doesn't qualify for auto financing, a personal loan may be the only option. And if the difference is small (e.g., 2-3 percentage points on a $5,000 car), the personal loan's flexibility may be worth it.

Can I use a personal loan to buy a car at a dealership?+

Yes. The dealer doesn't need to know you're using a personal loan. You receive funds in your bank account, then pay the dealer like a cash buyer. This can also give you negotiating leverage since you're not tied to dealer financing.

Does an auto loan build credit the same way as a personal loan?+

Both are installment loans reported to the major bureaus. On-time payments build payment history equally. The main difference is that an auto loan is a secured installment account, which adds a different type of tradeline than an unsecured personal loan.

Other comparisons

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