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Auto Loans

Debt in the United States has grown by almost 20% in the last decade, and personal and auto loans – two of the most common loan options – continue to grow. Americans currently hold $305 billion in personal loans and $1.2 trillion in auto loans.

So which among these popular loan options is best for you if you want to replace a vehicle or pay for expensive car repairs? Learn how to choose the right one in this guide about personal loans vs. auto loans.

Personal Loans Vs. Auto Loans: How Do They Work?

There are significant differences between personal loans and auto loans. This includes the qualifications as well as the loan terms.

How Does a Car Loan Work?

Auto loans are exclusively for the purchase of a vehicle. A car loan can be one of several types: new car loans, used car loans, lease buyout loans, or refinance car loans. If you’re applying for a new or used car loan, you usually have these two options:

  • Apply with a specific vehicle in mind by including its vehicle identification number (VIN) in the application.
  • Apply for the loan then shop for a vehicle within your loan limits.

When you have the approval and know which car to purchase, you can finish the car buying process. This will include signing contracts – they’ll give you the interest rate, monthly car payments, as well as any other costs associated with the loan. Your lender might send the funds directly to the dealership, or you will receive the loan as a deposit in your bank account.

If you’re refinancing a car loan, you will apply using your vehicle information. In most cases, your new lender will pay off the loan directly.

How Does a Personal Loan Work?

Personal loans don’t have the same purchasing restrictions as auto loans. There are several reasons you might get a personal loan like debt consolidation, medical bills, or car repairs. Other characteristics of personal loans include:

  • Higher interest rates and fees, especially for unsecured loans.
  • More stringent approval criteria due to the increased risk.

When you apply for a personal loan, you might get automatic approval. In some cases, you might receive your loan funds by the next business day. While not everyone will receive immediate approval, many lenders will request supporting documentation like income statements. Your credit score will play a significant role in your personal loan terms.

The lender will typically deposit the funds into your bank account – the fastest way to receive your loan – but you might have the option to receive a check by mail if you want.

How to Choose the Right Personal Loans and Auto Loans

As personal loans and auto loans have different purposes, you’ll know which one you need. However, choosing the right lender and loan offer can be tricky.

You can reduce the stress with these effective tips:

  • Compile a list of interest rates, length of the loan, and any other fees.
  • Determine if you have any other options and how they compare to the loan offers.
  • Evaluate other features and reviews for each lender and loan.

The lowest rate might not be the best option – other aspects like convenient account access and flexible payment dates could be better for you.

Frequently Asked Questions About Car Loans and Car Repairs

Deciding to apply for loans is a big decision – it immediately impacts your credit and has the potential to have other consequences. A few common questions can help guide you down the right path.

Do You Need Good Credit for Car Loans or Car Repair Loans?

Every lender has different credit requirements, and “good” is a subjective term. Traditional car loans are generally available for people with at least a 670 FICO score. Subprime auto loans, on the other hand, might be available for people with credit scores around 580, according to Experian.

A car repair loan is most likely a personal unsecured loan. That means you might have a hard time getting approved with poor credit. However, some lenders might be able to approve you with credit scores around 600.

What is a Lien on a Car Title?

A lien on a car title is a “notice” to other lenders, the government, and your insurance company that a company has the right to the vehicle in the event you don’t pay back a loan for the vehicle. They are relatively common and can be easily removed when you pay off the vehicle or debt.

Should You Use a Loan for Vehicle Repairs?

Vehicle repairs can be costly, and the most expensive ones always seem to come as a surprise. Unless you have a substantial amount saved, you can find yourself in a serious bind that requires a loan. If you don’t have any other options, a personal loan can be a necessary decision.

Compare rates and terms carefully and try to limit the loan to just the amount you need to reduce your total costs.

Can You Refinance a Car Loan with Bad Credit?

“Bad” credit can mean different things, so it’s best to understand your credit score first. According to Experian, good credit is anything over 669 and scores below it is either fair or poor. While good credit scores certainly yield loans with more favorable interest rates, there are refinancing options available for people with fair credit scores. You can also consider applying with a cosigner to refinance your car.

Find the Right Lender for Your Financial Goals

The right lender is willing to build a relationship with you. They’ll understand your financial needs, connect you with the right loan, and support the loan process for a smooth experience.

Are you ready to work with a lender that works for you? Mariner Finance may be your solution for a long-term financial relationship.

Blog posts are for informational purposes only.

†We offer personal loans from $1,000 to $25,000, with loans terms from 12 to 60 months. Minimum and maximum amounts dependent on an applicant’s state of residence and the underwriting of the loan. Loans between $1,500 and $15,000 may be funded online. Loans greater than $15,000 or less than $1,500 are funded through our branch network. Specific interest rates and fees are determined as permitted under applicable state law and depend upon loan amount, term, and the applicant’s ability to meet our credit criteria, including, but not limited to, credit history, income, debt payment obligations, and other factors such as availability of collateral. Not all rates and loan amounts are available in all states. Additional fees may apply to some loan offers; some state required and/or permitted fees may be treated as prepaid finance charges. Any such charges shall be in addition to the loan amount requested and/or approved and shall be fully disclosed to the applicant on his/her loan agreement. Not all applicants will qualify for the lowest rates or larger loan amounts, which may require a first lien on a motor vehicle not more than ten years old titled in the applicant’s name with valid insurance. Our loan by phone and online closing process requires a compatible mobile or computer device on which you can access your email and electronic documents. Not all loan types are eligible for loan by phone or online loan closing.


To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. As a result, under our customer identification program, we must ask for your name, street address, mailing address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.


*The process uses a “soft” credit inquiry to determine whether a loan offer is available, which does not impact your credit score. If you continue with the application process online and accept a loan offer, or are referred to a branch and continue your application there, we will pull your credit report and credit score again using a “hard” credit inquiry. This “hard” credit inquiry may impact your credit score.



California Residents: Loans made or arranged pursuant to a California Financing Law license.

VA Residents – Mariner Finance of Virginia, LLC, Licensed by the Virginia State Corporation Commission, Consumer Finance Company License No. CFI-114.


Mariner Finance, LLC, NMLS No. 166564 (
8211 Town Center Drive, Nottingham, MD 21236. Telephone Number 877-310-2373.

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