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What to tell the bank a personal loan is for if its really for a car?

ShaneD asked:

Say I wanted to get a personal loan from my local credit union, like $2000 or $3000 at the most, and I’m really going to use it to buy a car, what should I tell the bank it’s for? Or would it matter if I told them I was buying a car with it?
Asked on: 2012-12-24 09:27:02

4 Comments

  1. G. Whilikers says:

    A car is a perfectly acceptable use for a personal loan. You don’t have to hide it.

  2. Jerry says:

    You should be getting an auto loan instead of a personal loan.

    The interest rate on an auto loan is LOWER than on a personal loan because there is collateral.

    The only reason to use a personal loan to buy a car is if the vehicle is too old/damaged to serve as acceptable collateral. Of course any such car is likely to be a poor purchase to begin with.

  3. Wolf Harper says:

    You could just get an auto loan. The upside is lower interest, and it’s better for your credit report. The downside is it’s harder to apply, and they will repo the car if you don’t pay.

    If it’s a personal loan (not an auto loan) then they truly do not care what you spend on it so you can ask the bank’s advice. It’s simpler to apply for the loan because they don’t need to inspect the car. The interest is higher because it’s “unsecured debt” but it also means they can’t take the car if you don’t pay (depending on your state’s laws about asset protection and bankruptcy).

    I still don’t recommend a loan to buy a car that’s out of warranty. The engine blows up, and you have a loan! And no car! And you need a car!

    Also the single best way to save money on cars is buy older cars and do your own maintenance. It saves just unbelievable amounts of money. My friend did a water pump and timing belt, $750. I do that same job for $100, and four hours of my time. If I needed to buy the tools, $250.

  4. SumDude says:

    A personal loan is a personal loan. You need not explain it. Spend it however you want. But as someone else said, a car loan may be cheaper, and probably easier to get, since it is backed by the car as collateral.

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