You can use a personal loan for any purpose you choose, including auto financing. Some consumers choose this route to purchase a vehicle because an unsecured personal loan does not require collateral for approval. Most auto loans use your purchased vehicle as collateral for your loan. This means the lender can repossess the automobile if you don’t meet the loan agreement terms. If you purchase your vehicle using a personal loan, you’ll have no collateral requirement. Just keep in mind that you may not qualify for the same loan amounts with a personal loan as you would with a secured auto loan. That could limit your purchasing power and narrow down your car-buying options. Not to mention, auto loan interest rates are generally far lower than those of personal loans. Some auto loans also come with an added warranty on the vehicle, which you may not receive if you pay for the car or truck with a personal loan. You may also find that your interest rate may be higher on a personal loan if you have very bad credit. That’s because unsecured loans often have higher fees that offset the risks that lenders take when extending loans without security or collateral involved.