Getting a new or used car without having the cash means that will need to be financed. Usually, people think of either get a car without knowing the difference between personal loan and auto loan. These two types of loans may appear to be similar but some key differences are making one better than the other when considering buying a car.

1. Interest rates

Personal loans can be secured against something of value or unsecured. Unsecured loans have higher interest rates. However, even secured personal loans have higher interest rates than car loans. The lower the interest the less you will have to pay back over the price of the car and the lower your monthly payments will be.

2. Loan periods

Car loans can be taken over long periods. It is possible to get a car loan for 7 years. Personal loans are more restrictive. Unsecured loans are even more so than secured ones. Because the car becomes collateral, lenders have their money insured against an asset that can be repossessed and sold to cover the loan in case of a default.

3. Convenience

Most dealers have agreements with lenders and offer quick car loans. Usually, the entire process and paperwork take much less time when working with the car dealer and their partner lender. You may want to first check their interest rates to see if you are getting a good deal. Also, check what type they are offering and if they offer both, ask that is the difference between personal loan and auto loan that they offer.

Knowing what the difference between the two is the first step. When looking for a car, it is better to negotiate the price of the car first, then think about how you will finance it. You might be able to get a better deal then than after you agree to take a car loan.