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Personal Loans: Is There A Better Loan For Car Owners?Valley Auto Loans » Articles » Auto Loans » Personal Loans: Is There A Better Loan For Car Owners? Last Updated On: November 9, 2016

Personal Loans, Other Loan Options with Lower APR

Personal Loans offer many financial options to people who need money for unexpected expenses and find themselves short on cash. Personal loans and unsecured loans are installment loans that do not require collateral such as a home or property. However, no collateral loans do require security in the form of a good credit score with a credit history and steady income.

Small Personal Loans are a convenient way to consolidate debt or:

  • Pay for home improvements or remodeling
  • Pay for weddings or vacations
  • Get money for unexpected medical bills
  • Trade for a better APR on present loan
  • Start or upgrade your small business
  • Pay for unexpected attorney and court fees

Signature Loans and Personal Loan Benefits

Applying for personal loan Whether you are remolding a kitchen, paying off credit cards with high interest rates or looking for a way to pay for a divorce, you have the option of getting a signature loan.

Let’s look at personal loans and advantages of bad credit personal loans for those with low credit scores.

The thing that makes an unsecured personal loan different than a secured loan is that you have not placed any assets at risk of being seized if the loan is defaulted on. Personal loans carry a higher interest rate than most conventional secured loans because these loans are a bit riskier than a loan that is secured by a valuable asset such as a home or car. This is why these types of loans are known as Signature Loans. The loan is secured with your signature and your credit history.

If you qualify, Personal loans can provide larger amounts of money than most fast cash, no credit check or payday loans can. Also, personal loans typically carry loan terms for 3 to 5 years but have longer terms. Personal Loans makes debt consolidation possible without securing the loan with personal assets or collateral.

Many Personal loan qualifications are based on a low debt to income ratio and steady income. Personal loans for people with bad credit can qualify for subprime personal loans because the lenders look closer at their income and job performance than their credit profile or secured assets. Although, bad credit personal loans will not provide you with the lowest APR they can be used to improve your credit.

As with any unsecured loan, personal loans have the highest interest rates available on the market. The best personal loan rates are offered for good credit borrowers and are still higher than other secured loans.

Before selecting a personal loan, you should consider what the high-interest loan will cost you in the long run.

Is There a Better Loan Choice Than High-Interest Personal Loans?

We think so. In your search for the best personal loan rates, you may not have considered refinancing your car to get the money you need. Secured loans are better than a personal loan in many ways. Many people looking for a personal loan have a car loan they are already paying on as well. Instead of adding another loan payment to your budget why not let a new car loan work for you by refinancing to gain the equity that is in your vehicle.

Here are some examples of how different unsecured loans and secured auto loans can be when it comes to lowest APR and Lowest monthly payment loans.

Excellent Credit 720- 850
$8,000. Personal Loan for 36 months 10.94% APR your payments -> $262.00
$8,000. Auto Refinance for 36 months   2.4% APR your payments -> $231.00

Good Credit 690 – 719
$8,000. Personal Loan for 36 months 14.56% APR your payments -> $276.00
$8,000. Auto Refinance for 36 months   3.3% APR your payments -> $234.00

Average Credit 630 – 689
$8,000. Personal Loan for 36 months 19.84% APR your payments -> $295.00
$8,000. Auto Refinance for 36 months 3.35% APR your payments -> $234.00

Bad Credit 580 – 629
$8,000. Personal Loan for 36 months 28.64% APR your payments -> $335.00
$8,000. Auto Refinance for 36 months   5.25% APR your payments -> $241.00

Poor Credit 579 – 550
You will not qualify for a personal loan “with most lenders” with a credit score below 579

$8,000. Personal Loan for 36 months  36.00% APR your payments -> $366.00

Auto Refinance is easy to qualify for even with a credit score below 579
$8,000. Auto Refinance for 36 months  5.25% APR your payments -> $241.00

As you can see from this example, refinancing an auto loan can be a better loan choice than taking out a small personal loan.

If you are making car payments now, then getting a personal loan will add another monthly payment. Refinancing your vehicle can get you the immediate cash you need and can lower the car payment you have now by stretching out your loan term.

Refinancing your car loan has all the benefits of a personal loan without the high-interest rate that comes with an unsecured loan. If you have a car loan that you have been paying on for a couple of years or if your vehicle is paid off, the car has equity built up.

By removing the equity in the form of a cash out auto refinance, you can get a lower APR than personal loan rates and the money you need. You could also qualify for a lower monthly car payment as well.

Car loans are secured loans that are secured by the value of the car itself. This makes it easier for someone with average or bad credit to qualify for a subprime loan with the lowest APR compared to a Personal loan that is unsecured.

Best Personal Loan Rates Are Not Good Enough

Personal loan optionsLet’s look at an example of a young mom who took out a personal loan and then discovered she should have refinanced her car instead.

The young woman was going through a divorce with no extra money to pay for the high legal fees associated with hiring an attorney. She had good credit and took out a personal loan for $10,000 at 8.99%. Her payments per month were $207.89.

This sounded pretty good until she discovered she could have refinanced her three-year-old car for a better deal. She owed $9,000 on a car that was worth $17,000 and had a loan APR of 2.7% with monthly car payments of $278.39

Now, the personal loan added to her car loan came to $486.28 per month. As a single mom, she found it difficult to pay this amount every month and needed a better loan deal.

She decided to refinance her car loan for the full amount of $17,000 and pay down the personal loan she had gotten. Her new car loan APR was 2.99% (it would have been lower if she had not taken the personal loan). That is a lot better than the 8.99% that her personal loan carried.

She got immediate cash and paid $7,000 of her personal loan and now had $11,000 in cash to pay for divorce and child custody fees. Best of all her new car loan was $254.77 a month, and her personal loan was reduced to only $98.26 a month. This made her combined monthly payments of only $353.03.

As you can see refinancing the car by itself dropped her car payment to $254.77 and put $8,000 of equity in her pocket.

Three important things to remember about personal loans

  1. Personal loan rates have higher interest rates than car refinance loans for the same credit rating.
  2. Refinancing a car loan can turn equity to immediate cash and offer you a lower monthly car payment.
  3. Bad credit personal loans are harder to get than bad credit refinancing loans.

More money, less payment, improve your credit. Easy choice.

Personal Loan Drawbacks

Some of the personal loan drawbacks are obvious. Typical personal loan rates for average credit can range from 5.99% to 36.00%. For folks with low credit scores, that means an average APR of 26% or higher. It will also be difficult to get a person loan without good credit and a form of secured assets.

Even though lenders that offer personal loans claim a fast loan process, they can take several days as they collect all the information needed to finalize your loan and send you a check. Refinancing is fast and easy and can be done online in a matter of minutes.

Many lenders offer you onlytheir loan” and don’t check the other lenders for a better deal for you.

Valley Auto Loans is a loan broker. The service we offer you is to do the looking for you and find the best loan and the best loan rates for your car refinancing and other auto loans. This gives you the most cash at the lowest APR and monthly payments for good or bad credit ratings. This type of loan will provide better benefits than conventional unsecured loans and small personal loans.

Personal Loans or Refinance Loans. Which should you choose to consolidate debt?

Personal Loans Online

Consolidating debt into one low APR loan is a good idea, and everyone can see the benefits in a lower monthly payment. However, when choosing to take out a personal loan or refinance a car loan for the cash you need, you should look at the facts.

Most people are already making car payments along with other housing expenses. Adding another monthly payment for a personal loan only makes your monthly payments harder to stay above water.

The lowest APR personal loan you can get should have a lower interest rate than the debt or major purchase you are paying off with the new loan. If the personal loan has a higher interest rate but has a longer loan term to establish lower monthly payments, it will cost more to pay down that debt.

Refinancing a car loan to use the equity is a good way to consolidate a high-interest loan or debt into your car which can have a much lower APR then no collateral loans.

You have the option to extend your vehicle loan terms to lower your loan payments, and you will get the money you need from the equity without adding a second loan payment.

Personal loans can work to improve your financial status if you use them with a long-term plan to pay down your debt by consolidating. Just remember that the lowest APR loans are those secured by collateral like car loans and are better than a personal loan.

Refinance Loan CalculatorBy refinancing a secured car loan, you can pay off other debt with the cash back and lower your monthly debt to income ratio. This, in turn, will automatically raise your credit score. If you have a terrible credit score and can’t qualify for a personal loan, you may be able to qualify for a refinance without a cosigner.

Valley Auto Loans offers a loan payment calculator that will assist you in estimating your monthly payments if you know your credit score. If you do not, you can also check your credit score for free.

Imagine the possibilities of taking out a refinance loan to go on vacation or a honeymoon and having a lower monthly payment for your monthly budget when you get back instead of two payments that put you further into debt.

Personal Loan Examples

This average APR of personal loan rates and payments is intended to act as an example of how your APR effects the amount you pay back for the amount you borrow. Your actual APR will be assigned by the lender you choose so it I important to understand interest rates and credit ratings.

Personal Loan Example

Amount you borrow         APR          Loan Term            Monthly Payments           Total you will Pay

$8,000     Excellent credit   5%           48 months           $184.23                               $8,843.25

$8,000     Good credit        10%          48 months           $202.90                               $9,739.23

$8,000     Average credit   20%          48 months           $243.44                                $11,685.26

$8,000      Bad credit          36%          48 months           $316.62                               $15,197.87

You can see from this simple example how your APR can cost you a lot of money. Don’t let the convenience of an unsecured personal loan lead you into higher financial debt.


Now let’s compare that same $8,000 cash in pocket through an auto refinance loan that will have a lower APR for a secured loan.

Auto Refinance Loan

Amount you borrow         APR          Loan Term            Monthly Payments           Total you will Pay

$8,000   Excellent credit   2.2%          48 months           $174.26                             $8,364.49

$8,000    Good credit        3.5%          48 months           $178.85                             $8,584.70

$8,000    Average credit   6.3%          48 months           $188.98                              $9,071.16

$8,000    Bad credit           12%           48 months           $210.67                              $10,112.19


Your credit profile and the lender’s loan terms will determine your APR, and that is why it is important to shop around for the right loan. Small personal loans should only be used as a last resort if you do not have enough equity in your car loan to cover the debt you need to pay down.

As in the example of the young mom, combining a personal loan and a refinance loan can give you more money than you have equity without committing to a long term personal loan with high interest and high monthly payments.

Qualifications For a Personal Loan

Personal bank LoanMoney lenders and their requirements can be very different. Some lenders choose to offer the absolute lowest APR personal loan rates for minimal profit. These lenders and credit unions will have strict guidelines and will not offer loans to those with average, slow or poor credit.

On the other hand, most lenders will offer good rates to people with good credit and charge high interest rates to those with poor credit. Many will pay more for a personal loan than they should because it is an unsecured loan and carries a bigger risk to the lender.

There may not be a lot you can do about your credit score now but keep in mind that if you have to take a loan with a high interest rate, you can and should refinance it as soon as your credit improves.

If your credit is not as good as it should be, you can find money lenders who work with bad credit customers. These subprime credit lenders offer better rates for those with low scores because that is their specialty. Other lenders only specialize in personal loans with excellent credit and won’t take chances with high risk loans.

Personal Loan Requirements

  • 18 years of age
  • US resident
  • Have a steady job history and income
  • Have a bank account
  • Are not currently in bankruptcy
  • Acceptable amount of debt to income ratio
  • Most lenders have a minimum term of 36 months
  • Must pay origination fee
  • Zero down payment is required


What is APR?

When you borrow money, you are charged an interest rate based on the APR. The APR or Annual Percentage Rate is the amount of money you pay in interest during one year or your loan term.

The amount of money you are charged for the time you take to pay back the loan is the loan interest.

Loan companies use APR tables that correspond with your credit score to set the APR for your loan. Your APR rating combined with your personal loan terms determines your monthly interest rate for that loan term.

Fixed Rate vs. Variable Rate Personal Loans

Variable Loan Interest RatesMost Personal Loans are fixed rate, and the payments are a locked in price. However, some lenders offer variable rate loans to make APR they offer more appealing.

Fixed rate loans have a fixed interest rate that will not change through the course of the loan agreement. You will find that your monthly payments are set at the same amount for the entire loan term.

Many loan types such as home mortgages, car loans, student loans as well as personal loans have fixed rates. The advantage is that your payments will not change as the bank’s interest rate goes up or down.

Variable loan rates have adjustable interest rates that are determined by your bank or money lender. As the interest rate changes, so does your payment.

Personal Loans with variable rates are usually offered with a low-interest rate to entice the borrower. Then, after a time they catch back up to the present interest rate. From that point, they will follow the interest rate of the market.

The best time for getting a variable interest rate is if the economy is bad and the interest rate is high. When you take out the loan, the interest rate will probably go down and stay down for a time. This prevents you from getting locked into a high fixed rate just because you are getting the personal loan during bad economic times.

If you are getting a personal loan during good economic times and the interest rates are down then you would do good to avoid a variable rate loan. We know how fast the economy can change you would do good to keep a low-interest rate as the changing economy pushes up the APR.

A Better Choice Than Personal Loans

If your need the convenience of personal loans but don’t want the high-interest rate, or you do not want to add another payment to your monthly budget, then you should consider a refinance loan.

Refinancing your auto loan is as easy as applying for a personal loan. Valley Auto Loans works with lenders who can offer you a new loan fast and easy. Our application is simple to fill out from your smart phone and submit online. Best of all, lenders will look over your loan request and pick a loan for you based on your requests.

There is no charge for our services and you are not obligated to except any loan offers you are not happy with. So get that cash you need today to consolidate debt, make a major purchase or whatever you need.

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