BAKER & DANIELS

300 NORTH MERIDIAN STREET, SUITE 2700
INDIANAPOLIS, INDIANA 46204-1782
(317) 237-3000 - FAX (317) 237-1000






August 5, 1997


American General Finance Corporation
601 N.W. Second Street
Evansville, Indiana 47708

      Re:  Medium-Term Notes, Series E, 
           Due Nine Months or More from Date of Issue               
        

Ladies and Gentlemen:

      We have acted as counsel for American General Finance
Corporation, an Indiana corporation (the "Company"), in connection
with the issuance and sale by the Company of up to $1,000,000,000
aggregate principal amount of the Company's Medium-Term Notes, Series
E, due nine months or more from date of issue (the "Notes"), including
the preparation of:

      (a)  The Company's Registration Statement on Form S-3,
 Registration No. 333-28925, as amended by Pre-effective Amendment
 No. 1 (the "Registration Statement"), and the Prospectus
 constituting a part thereof, dated July 2, 1997, relating to the
 issuance from time to time of up to $3,050,000,000 aggregate
 principal amount of debt securities of the Company and warrants to
 purchase such debt securities pursuant to Rule 415 promulgated under
 the Securities Act of 1933, as amended (the "1933 Act");

      (b)  The Prospectus Supplement, dated August 5, 1997 to the
 above-mentioned Prospectus relating to the Notes and filed with the
 Securities and Exchange Commission (the "Commission") pursuant to
 Rule 424 promulgated under the 1933 Act (the Prospectus dated
 July 2, 1997 and the Prospectus Supplement dated August 5, 1997,
 including the documents incorporated by reference therein pursuant
 to Item 12 of Form S-3 under the 1933 Act, being hereinafter
 collectively referred to as the "Prospectus"); and  

      (c)  The Indenture, dated as of May 1, 1997, between the
 Company and The First National Bank of Chicago, as trustee, pursuant
 to which the Notes are to be issued (the "Indenture").

      For purposes of this opinion, we have examined originals or
copies, identified to our satisfaction, of such documents, corporate
records, instruments and other relevant materials as we deemed
advisable, and have made such examination of statutes and decisions
and reviewed such questions of law as we have considered necessary or
appropriate.  In our examination, we have assumed the genuineness of
all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
copies, and the authenticity of the originals of such copies.  As to
facts material to this opinion, we have relied upon certificates,
statements or representations of public officials, of officers and
representatives of the Company and of others, without any independent
verification thereof. 

      The laws covered by the opinions expressed herein are limited
to the laws of the State of Indiana.

      On the basis of and subject to the foregoing, we are of the
opinion that:

      1.   The Company is existing as a corporation under the laws
of the State of Indiana.

      2.   The Notes have been duly authorized by all necessary
action by the Board of Directors, and by the Terms and Pricing
Committee of the Board of Directors, of the Company and, when the
variable terms of the Notes have been established by any two of the
authorized officers to whom such authority has been delegated and the
Notes have been executed and authenticated as specified in the
Indenture and delivered against payment of the consideration therefor,
the Notes will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other laws of
general applicability relating to or affecting enforcement of
creditors' rights or by general equity principles.

      We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading
"Legal Opinions" in the Prospectus.  In giving such consent, we do not
admit that we come within the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules or regulations
of the Commission thereunder.

                          Yours very truly,

                          /s/ BAKER & DANIELS