Are you planning to buy a new car? Are you having problems applying for an auto loan?
Though the vehicle industry in Canada suffered a dip, it didn’t stop over 2 million Canadians from buying their very first vehicle in 2018.
But not every aspiring car buyer managed to secure a car loan. The reasons behind the rejections vary.
And it doesn’t come as a surprise if you are one of those people having problems securing a car loan.
But can you use a personal loan to buy a car? The straight-up answer is “yes.”
However, there are certain factors and situations you need to consider.
Continue reading below as we discuss different scenarios that make a personal loan the better option.
Can You Use a Personal Loan to Buy a Car?
Though applying for a car loan is the most popular route to take, roadblocks sometimes arise. These problems keep people from securing an auto loan. The next options people look into are personal loans.
But can you use a personal loan to buy a car? As we mentioned earlier, the answer is a resounding “yes.” But some factors and considerations come with that answer.
Let’s take a look at some instances that justify a personal loan.
1. If You’re Hunting for an Older Car
If you are looking for an older model, applying for a personal loan is the better financing option. This is because most car loan lenders only allow purchases of vehicles under a certain age.
If the car you are eyeing doesn’t fall under the age range, the lender will likely reject your application. On the flip side, a personal loan gives you the flexibility you need.
It will not bar you from buying an old car even if it is more than a decade old.
The same thing goes for project cars. These are the cars that are no longer road-worthy but still salvageable. Banks will likely reject loans for project cars.
2. When Your Credit Standing Prevents You
If your poor credit standing always results in auto loan rejections, then it’s time to consider a personal loan. Banks and other traditional lenders look into people’s credit standing. If their credit score fails to reach a certain number, the lender turns down the application.
On the other hand, you may find a personal loan company that is not as stringent. If you are applying for an unsecured loan, the lender will not require any collateral on your part. There is also no need to pay any deposits.
But if you have a good credit standing, you can enjoy excellent rates.
3. When You’re Buying from a Private Party
If you are planning to buy from a private seller, a personal loan is a less complicated route. Most buyers who list their vehicles on eBay or Craigslist prefer cash payments.
With a personal loan, you can get hold of the cash and pay for the car in full. Once you secure the vehicle, you may apply for a traditional auto loan. You can use the loan against the vehicle to refinance the balance of your personal loan.
4. When You Don’t Want Full-Coverage Insurance
A personal loan is also a better option if you wish to avoid carrying full insurance coverage. Full coverage is a common requirement for traditional auto loan applications. This coverage includes financial protection against theft, damage, and collisions.
Some car buyers forgo full insurance coverage if they are purchasing an older vehicle. Hence, they look for personal loans, which do not require full coverage.
The risk, however, is when you encounter a collision or if someone steals your car.
5. When the Interest Rate is Lower
Lastly, go for a personal loan if the interest rate is lower than what traditional options offer. This is tricky considering some personal loans come with higher interest rates. But if you are diligent enough, you will find a lender that offers competitive rates.
Tips Before Application
Though applying for a personal loan is faster than ever, you still need to prepare before you apply. Here are some tips to consider before signing anything.
1. Fix Your Paperwork
To ensure a smooth application, make sure to organize your paperwork early. Call the lender and get a list of the necessary documents. Complete them one-by-one before going to their office.
2. Mind Your Budget and Debts
Do you have any existing debts? Are you struggling to manage your monthly finances? These are serious questions you need to ask yourself before applying for a personal loan. Some lenders prefer borrowers with manageable debts.
In case you have huge debts, delay your loan application and work on cutting down your debts. You may also consider consolidating your debts to make them more manageable.
3. Avoid Multiple Applications
Never have multiple loan applications. Loan applications will trigger a credit report examination. Lenders will know if you have multiple applications in play.
This will give them the impression that you are only out to con them. This will likely result in an automatic rejection.
4. Can You Repay It?
Before applying for a loan, you need to be honest with yourself. Ask yourself if you are capable of repaying the loan. Be realistic and determine if you can pay up even if a life-changing event takes place in the middle of your payments.
Can you still shoulder the payments in case you lose your job next week? If there is a family emergency, do you have extra funds for it?
5. Don’t Go Beyond What You Need
Last but not least, do not borrow an amount that is more than what you need. Be honest when it comes to the amount you are borrowing.
Get the Money You Need, Today!
Can you use a personal loan to buy a car? Most certainly! As long as you take into heart the points we discussed above. As for finding the right lender, you have come to the right place.
We offer personal loans that come with flexible payment terms and competitive rates. Connect with us and tell us what you need. Let’s discuss your options and let’s get that money you need today!