Thinking about taking out a personal loan? One hesitation may come from the fact that you don’t know much about personal loans and don’t have much experience with them. However, if you’ve ever taken out an auto loan, you actually likely know your way around a personal loan quite well.
1. Both loans enable you to buy something outside of your current financial means.
The most obvious similarity is what both loans allow you to do: buy something you wouldn’t have been able to with the funds you currently have. With an auto loan, it might be that new or used car you’ve been eyeing on the lot, but with a personal loan, that purchase can be any number of things. You can use personal loans to help pay for a vacation or wedding, buy a present for graduation or Mother’s Day, purchase back-to-school gear, or even consolidate debt. The freedom an auto loan offers in terms of choosing the car you want is very similar to the freedom a personal loan offers for you to buy whatever else you might need.
2. Both loans come with monthly installment plans.
Whether you take out an auto loan or a personal loan, you will be able to pay back that loan with monthly installment payments. This makes paying for a car or other major purchase easier, since you can make payments over time rather than having to fork over all of the cash at once. The amount of your monthly payment will vary based on the loan amount, repayment period, and interest rate, but if you’re comfortable making monthly installment payments on your auto loan, you’ll have no trouble doing the same for a personal loan.
3. Both loans take your credit score into consideration.
If you went through the process of determining your credit score for an auto loan, expect to do the same for a personal loan as well. With both loans, the better your credit, often the better your interest rate is.
Many people have more experience with auto loans than they do with personal loans, but if you’re familiar and comfortable with one, you should have no trouble managing the other.
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