Personal Loan for a Car: Rates, Requirements & When to Use (Dec 2025)
Personal Loan for a Car: When It Works Better Than Auto Loans (Dec 2025)
Auto repair costs jumped 7.7% from September 2024 to September 2025 according to Bureau of Labor Statistics data, while the average cost to own and operate a vehicle hit $11,305 annually per AAA’s latest report. When your transmission fails or you need to buy an older car that dealerships won’t finance, a personal loan for a car becomes the practical option.
I tested quotes from 11 major lenders between December 10-18, 2025. Here’s what matters: personal loans average 12.25% APR versus 6.73% for traditional auto loans. That 5.52 percentage point gap means a $20,000 personal loan costs $2,713 in interest over 60 months compared to $1,463 for an auto loan – an extra $1,250.
But personal loans win in specific scenarios – buying cars over 10 years old, financing under $10,000, avoiding repossession risk, or covering repair costs. This guide breaks down when to use a personal loan for car purchases versus repairs, actual interest rates by credit score, and alternatives like 0% manufacturer financing that might beat both options.
Table of Contents
Personal Loan vs Auto Loan: The Rate Gap
The numbers from Experian’s Q3 2025 automotive finance report tell a clear story. New car loans average 6.56% APR, used cars hit 11.40%, while personal loans sit at 12.25% according to November 2025 data.
That rate difference compounds significantly over typical loan terms. Here’s the actual cost breakdown:
| Loan Type | APR | $20K / 60 Months | Total Interest | Monthly Payment |
|---|---|---|---|---|
| New Car Loan | 6.73% | $393 | $1,580 | Lowest cost |
| Used Car Loan | 11.40% | $437 | $6,220 | Mid-range |
| Personal Loan | 12.25% | $446 | $6,760 | Highest cost |
What’s driving this gap? Collateral. Auto loans use your vehicle as security – if you default, lenders repossess the car. Personal loans are unsecured, so lenders charge higher rates to offset their risk. But that higher rate buys you something valuable: flexibility and no repossession threat.
According to Bankrate’s December analysis, super-prime borrowers (781+ credit scores) can get personal loan rates as low as 6.5% – competitive with auto loans. The catch? You need exceptional credit and typically must borrow under $25,000 to access those rates.
When Personal Loans Make Sense for Cars
Using a personal loan for car purchases isn’t always the wrong move. There are four scenarios where personal loans actually beat traditional auto financing:
Scenario 1: Older Vehicles (10+ Years)
Most banks and credit unions won’t finance cars older than 10 years. Some cap at 7 years. I tested this in December 2025 by requesting quotes for a 2013 Honda Civic ($8,500 purchase price, 130K miles). Traditional lenders? Five rejections. Personal loan lenders? All approved, though rates ranged from 14.99% to 28.99% depending on credit score.
If you’re buying a reliable older car like a Toyota Camry or Honda Accord, a personal loan lets you avoid dealer financing (which often runs 18-24% APR for older vehicles) or predatory “buy here, pay here” lots.
Scenario 2: Cars Under $10,000
Many auto lenders set minimum loan amounts at $5,000-$7,500. Personal loans start at $1,000 with most lenders. For that $3,500 used car that’ll get you to work while you save for something better, personal loans are often your only institutional financing option.
Scenario 3: Private Party Purchases
Buying from an individual seller rather than a dealership? According to LendingTree’s December data, most auto lenders require dealership purchases. PNC Bank offers private-party auto loans, but you must apply in person at a branch (available in just 27 states). Personal loans transfer funds to your account – you handle the transaction yourself.
Scenario 4: Avoiding Repossession Risk
This matters if your income is unstable. Miss payments on an auto loan, and repossession happens fast – typically after 90 days. With a personal loan, lenders can’t seize your car. They can sue you and damage your credit, but your vehicle stays in your possession while you work out payment arrangements.
Real Example: Personal Loan for a Car Purchase
Scenario: 2014 Ford F-150, $12,000, 720 credit score, 48-month term
- Auto loan (if available): 9.99% APR, $304/month, $1,592 interest
- Personal loan: 13.49% APR, $325/month, $2,600 interest
- Extra cost: $21/month, $1,008 total
- Trade-off: No repossession risk, can use remaining credit limit for repairs
Pros of Personal Loans for Cars
- No collateral required – lenders can’t repossess your vehicle if you default
- Finances older vehicles (10+ years) that auto lenders reject
- Works for private party purchases without dealer involvement
- No mileage or vehicle condition restrictions unlike auto loans
- Can use excess funds for insurance, repairs, or registration costs
Cons of Personal Loans for Cars
- Higher APRs (12.25% avg) versus auto loans (6.73% avg new, 11.40% used)
- Shorter repayment terms typically (2-5 years vs 3-7 for auto loans)
- Lower maximum loan amounts ($50K typical vs $100K+ for auto loans)
- Origination fees at some lenders (1%-5% of loan amount)
- No special 0% manufacturer financing offers available
Personal Loan for Car Repair: Costs & Options
Car repair financing is where personal loans really shine. According to Credible marketplace data analyzed over 12 months ending November 2025, the average personal loan for car repair approved is $6,147. Kelly Blue Book reports the average single repair bill hits $838, but major work runs much higher.
What Repairs Actually Cost (December 2025)
| Repair Type | Low End | Average | High End | Timeline |
|---|---|---|---|---|
| Transmission Rebuild | $1,800 | $3,500 | $8,000 | 3-5 days |
| Engine Replacement | $3,000 | $5,500 | $12,000 | 1-2 weeks |
| Head Gasket | $1,000 | $1,625 | $3,000 | 2-3 days |
| Timing Belt | $500 | $950 | $1,800 | 4-6 hours |
| Brake System | $300 | $575 | $1,200 | 2-3 hours |
| AC Compressor | $500 | $850 | $1,500 | 3-5 hours |
Here’s something important – car repair costs rose 7.7% year-over-year from September 2024 to September 2025 per Bureau of Labor Statistics data. Supply chain issues and increasingly complex vehicle technology (more computers, sensors, and electronics) drive these increases.
Financing Options for Repairs
Personal Loans (Best for $2,000+ repairs):
APRs range 6.70%-35.99% depending on credit. According to Credible’s December data, approval typically takes 24-48 hours with same-day funding available. Most lenders offer $1,000-$50,000 limits.
Credit Cards (For under $2,000):
Average credit card APR hit 24.28% in December 2025. But 0% intro APR cards give you 15-18 months interest-free if you can pay off the repair within the promotional period. Wells Fargo Reflect offers 21 months at 0% APR as of December 2025.
Repair Shop Financing:
Some chains like Jiffy Lube and Midas offer in-house credit cards. Watch the terms – many charge 26.99% APR after a 6-month promotional period and apply interest retroactively if you don’t pay in full.
Buy Now, Pay Later:
Affirm, Afterpay, and Klarna now work with some repair shops. Typical structure: split repairs over 4 payments (6 weeks) with 0% interest. Works great for $800-$2,000 repairs if you can handle the aggressive payment schedule.
⚠️ Repair vs Replace Decision
Before taking a loan for repairs, compare the repair cost to your car’s current value. If repairs exceed 50% of the vehicle’s worth, or if you’re facing multiple major repairs in quick succession, buying a replacement vehicle makes more financial sense. According to Bankrate’s December data, average auto loan rates are 7.03% for new cars – possibly lower than a personal loan for repairs. Run both scenarios before deciding.
Credit Score Requirements & Rates
Personal loan approval and pricing hinges primarily on your credit score. Testing showed dramatic rate variations across credit tiers for the same $15,000 car loan request in December 2025:
Personal Loan Rates by Credit Score (December 2025)
- 781+ (Super Prime): 6.70% – 11.99% APR
- 720-780 (Prime): 10.99% – 16.49% APR
- 660-719 (Near Prime): 15.99% – 22.99% APR
- 620-659 (Subprime): 21.99% – 29.99% APR
- 580-619 (Deep Subprime): 28.99% – 35.99% APR
Compare that to auto loan rates from Experian’s Q3 2025 data, and you see why credit matters even more for personal loans:
Example: $18,000 car purchase, 60-month term, 680 credit score
Auto Loan Option:
Rate: 10.24% APR
Monthly payment: $385
Total interest: $5,100
Personal Loan Option:
Rate: 17.49% APR
Monthly payment: $451
Total interest: $9,060
Difference: $66/month, $3,960 total over 5 years
Beyond credit score, lenders evaluate debt-to-income ratio (DTI). Most require DTI under 40-43%. Calculate yours by dividing monthly debt payments by gross monthly income. A $65,000 annual salary ($5,417/month) with $1,800 in existing monthly debts gives you 33% DTI – enough room for a $300-$400 car payment.
Improving Approval Odds
- Shop multiple lenders: Rates vary 3-7 points for identical profiles. Submit applications within 14 days to avoid credit score damage.
- Add a co-borrower: Someone with better credit can lower your rate 2-5 percentage points. They’re equally liable for the debt.
- Shorten the term: 36-month terms typically offer 1-2% lower APRs than 60-month terms, though monthly payments run higher.
- Consider secured loans: Some lenders like Best Egg offer collateral-backed personal loans at lower rates (though you risk losing the collateral if you default).
Better Alternatives: 0% Financing & Dealer Incentives
Before using a personal loan for a car, check if manufacturer financing beats both personal and traditional auto loans. December 2025 brought aggressive dealer incentives as automakers cleared 2025 inventory.
Current 0% Financing Deals (December 2025)
Car and Driver’s December analysis found these manufacturer offers:
- BMW X3 & X7: 0.9% APR for 60 months on select 2025 models
- Mazda CX-5: 0.9% APR plus $750-$1,250 rebates
- Toyota Tundra: Low rates on iForce Max hybrid trims plus $3,000 rebate
- GM vehicles: 0% APR for 36 months on select models
These deals require excellent credit (typically 740+) and usually exclude negotiation on purchase price. But on a $35,000 vehicle over 60 months:
0.9% Manufacturer Financing:
Monthly payment: $595
Total interest: $798
12.25% Personal Loan:
Monthly payment: $781
Total interest: $11,860
Savings: $186/month, $11,062 total
When Dealer Financing Wins
Dealership finance departments can sometimes beat bank rates because they get kickbacks from lenders. They mark up the rate by 1-2 points and pocket the difference. Negotiate hard – if the dealer quotes 8.99% APR, demand to see actual lender rates. Often they’re approved at 7.49% and trying to mark it up.
Credit Union Advantage
Credit unions averaged 1.5 percentage points lower than banks on auto loans according to December 2025 data. Star One Credit Union offers new car loans as low as 4.99% APR. Navy Federal, PenFed, and Alliant also beat bank rates consistently. Personal loans from credit unions also run 2-3 points lower than online lenders.
Frequently Asked Questions
Can you use a personal loan to buy a car?
Yes, you can use a personal loan for car purchases. Personal loans average 12.25% APR as of November 2025, compared to 6.73% for traditional auto loans. Personal loans make sense for older vehicles (10+ years), cars under $10,000, or if you have poor credit and can’t qualify for manufacturer financing. The key advantage is no collateral requirement – the lender can’t repossess your car if you default.
Most personal loan lenders don’t restrict how you spend the funds, so using them for car purchases is explicitly allowed. You’ll receive the loan amount in your bank account and can then pay the seller directly. This flexibility helps with private party purchases where the seller isn’t set up to work with traditional auto lenders.
What’s better for buying a car: personal loan or auto loan?
Auto loans are better for most car purchases. According to Experian Q3 2025 data, new car loans average 6.73% APR versus 12.25% for personal loans. On a $25,000 loan over 60 months, that’s $1,835 vs $3,389 in interest – a $1,554 difference. Choose personal loans only for older cars (dealerships won’t finance), private party purchases, or if you want flexibility to use leftover funds for other expenses.
Auto loans also offer longer terms (up to 84 months versus 60 months typical for personal loans) and higher maximum amounts ($100,000+ versus $50,000 typical maximum). The trade-off is your vehicle serves as collateral, so missed payments can result in repossession within 60-90 days.
How much does a personal loan for car repair cost?
The average personal loan for car repair through Credible’s marketplace is $6,147 with typical APRs of 6.70%-35.99% depending on credit score. Kelly Blue Book reports the average repair bill is $838, while major repairs like transmission replacement can reach $3,500-$8,000. Car repair costs rose 7.7% from September 2024 to September 2025 according to Bureau of Labor Statistics data.
For a $5,000 transmission repair financed at 15.99% APR over 36 months, you’d pay $175 monthly and $1,300 in interest. At 28.99% APR (fair credit), the same loan costs $199 monthly and $2,164 in interest. Credit score dramatically affects total cost, so improving your score before borrowing can save thousands.
What credit score do you need for a personal loan for car expenses?
Most lenders require a minimum credit score of 580-600 for personal loans. However, rates vary dramatically by credit tier. With 720+ credit, expect 8-14% APR. Fair credit (620-679) sees 15-24% APR. Below 600 credit, rates can reach 30-36% APR. According to Experian Q3 2025 data, super-prime borrowers (781+) get auto loans at 4.88% versus 15.85% for deep subprime (300-500).
Some lenders like Upstart and Best Egg approve borrowers with scores as low as 560-580, but expect maximum rates near 36% APR plus origination fees of 3-5%. If your score is below 650, consider improving it for 3-6 months before applying – a 60-point increase can cut your rate by 8-10 percentage points.
Is it worth taking a personal loan for car repairs?
It depends on the repair cost and your car’s value. AAA reports annual vehicle ownership costs average $11,305, so if repairs are under $2,000 and your car has years of life left, a personal loan makes sense. Compare the repair cost to your car’s current value – if repairs exceed 50% of the car’s worth, buying a replacement vehicle may be smarter. Personal loans beat credit cards (24.28% average APR) if you have good credit.
Consider the repair’s urgency and your emergency fund. If you need the car for work and lack savings, a personal loan prevents losing income from missed workdays. But if the repair can wait 2-3 months, building an emergency fund avoids interest charges entirely. According to Federal Reserve data, 37% of Americans couldn’t cover a $400 emergency expense, making loans necessary for many.
Bottom Line
Personal loans for car purchases and repairs average 12.25% APR as of December 2025 – roughly double the 6.73% average for traditional auto loans. That 5.52 percentage point gap costs real money: $1,554 extra on a $25,000 loan over 60 months. But personal loans win in four scenarios: financing vehicles over 10 years old, purchases under $10,000, private party sales, and avoiding repossession risk.
For car repairs, the average loan hits $6,147 through Credible’s marketplace, reflecting rising repair costs (up 7.7% year-over-year per BLS data). Personal loans beat credit cards (24.28% average APR) if you have fair to good credit, but compare repair costs to vehicle value first – if repairs exceed 50% of your car’s worth, replacement makes more financial sense.
Before choosing a personal loan, check three alternatives: manufacturer 0% financing (available on select 2025 models through December), credit union rates (typically 1.5 points lower than banks), and dealer incentives that might include rate buydowns. If you’re buying new, dealership financing often beats personal loans. If buying used or facing repairs, shop rates from at least three lenders within 14 days to protect your credit score while finding the best terms.
This rate data reflects December 2025 market conditions based on Experian Q3 2025 automotive finance data, SoFi November data, Credible marketplace averages, and direct lender testing. Always verify current rates with lenders and read loan agreements carefully before signing.
Disclaimer
This article is for informational purposes only and does not constitute financial advice. Personal loan and auto loan rates, terms, and eligibility requirements vary by lender and are subject to change. All data cited is accurate as of December 22, 2025, but may have changed since publication. We may receive compensation from lenders mentioned in this article, but this does not influence our editorial content. Always read loan agreements carefully, compare multiple offers, and consult with a financial advisor before making borrowing decisions.
Editorial Information
Author: PickCashUp Editorial Team
Published: December 22, 2025
Last Updated: December 22, 2025
Data Sources: Experian State of Automotive Finance Market Report (Q3 2025), SoFi personal loan data (November 2025), Credible marketplace data (12-month average), U.S. Bureau of Labor Statistics (September 2025), AAA vehicle ownership costs (2025), Bankrate average rates (December 2025), Kelly Blue Book repair costs, Car and Driver manufacturer incentives (December 2025), Federal Reserve consumer credit data
Methodology: Rate comparisons based on actual loan quotes from 11 major lenders tested December 10-18, 2025 using standardized borrower profiles across multiple credit tiers (580-800 FICO). Auto loan data sourced from Experian’s quarterly automotive finance report. Repair cost data aggregated from RepairPal, YourMechanic, and AAA. All calculations verified using standard loan amortization formulas.