buying-car

Buying a Car with a Personal Loan

Need to finance a car purchase? Find out if a personal loan is worth it.

There are a few financing options you have to choose from if you want to buy a car. While you might immediately consider which car loan would be best for you, you may also want to consider a secured or unsecured personal loan. These loans can give you different benefits to a car loan. Find out what they are in this guide.

Personal Loans vs Car Loans: The basics

FeaturePersonal LoanCar Loan
Cars you can finance Any vehicle New and used up to a certain age
Pros
  • Flexibility with the car you want to finance
  • Range of loan options
  • Can use the funds for additional purposes
  • Designed to purchase a car
  • Can apply for higher loan amount
  • Competitive rates
  • Access to additional add-ons such as warranty
Cons
  • Higher interest rates than car loans
  • Eligibility requirements may be stricter
  • Restrictive on the type of car you can purchase
  • You can't use the loan for additional purposes

Citi Personal Loan Plus

Citi Personal Loan Plus

from

9.99 % p.a.

variable rate

from

10.95 % p.a.

comparison rate

  • Loan amounts from $5,000
  • Offers a reusable credit facility
  • Repay over 5 years
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100% confidential application

Citi Personal Loan Plus

Apply for a Citi Personal Loan Plus and get competitive interest rate offer with a reusable credit facility.

  • Interest rate from: 9.99% p.a.
  • Comparison rate: 10.95% p.a.
  • Interest rate type: Variable
  • Application fee: $199
  • Minimum loan amount: $5,000
  • Maximum loan amount: $75,000
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Comparison of Personal Car Loan Interest Rates

Rates last updated November 24th, 2017
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Monthly Repayment Product Description
Citi Personal Loan Plus
From 9.99% (variable)
10.95%
$5,000
3 to 5 years
$10
$199
Borrow up to $75,000 to use for a range of purposes. Competitive rate of 9.99% p.a. available to all approved applicants.
DirectMoney Unsecured Personal Loan
From 8.5% (fixed)
9.36%
$5,000
3 to 5 years
$0
$595
This unsecured loan features tiers of interest rates from 8.5% p.a. to 19.95% p.a. based on your credit history.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
9.51%
$5,000
2 to 5 years
$0
3% (of loan amount)
Based on your risk profile, you will receive a tailored rate between 7.5% and 20.14% with a SocietyOne personal loan.
NOW FINANCE Personal Loans
From 8.95% (fixed)
10.42%
$4,000
1.5 to 7 years
$13
$395 (Based on $10,000)
Get rewarded with a low interest rate for your good credit history. Rates from 8.95% p.a. to 16.95% p.a. depending on your credit score.
Pepper Money Unsecured Fixed Rate Personal Loan
From 9.99% (fixed)
9.99%
$5,000
1 to 7 years
$0
$0
Apply for up to $50,000 and receive conditional approval within minutes.
Bank Australia Lifestyle Personal Loan
From 11.89% (variable)
12.94%
$1,000
1 to 10 years
$0
$150
A competitive variable rate loan that gives you ten years to repay.
Latitude Personal Loans (Unsecured)
From 13.99% (fixed)
15.19%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
An unsecured loan designed for multiple purposes – renovating, buying a car or travelling. Funds can be in your account in as little as 24 hours.
Westpac Unsecured Personal Loan
From 12.99% (fixed)
14.14%
$4,000
1 to 7 years
$12
$0 (On new loan applications before 7th December 2017)
Borrow up to $50,000 for a term of up to 7 years with the unsecured Loan from Westpac
St.George Unsecured Personal Loan - Fixed Rate
From 10.99% (fixed)
12.07%
$2,000
1 to 5 years
$12
$0 (On new loan applications before 18th January 2018.)
Convenient redraw facility, flexible personal loan repayment options with competitive interest rate.
Bank of Melbourne Unsecured Fixed Rate Personal Loan
From 10.99% (fixed)
12.07%
$3,000
1 to 5 years
$12
$0 (On new loan applications before 18th January 2018.)
Apply for a loan from $3,000 and lock in a competitive fixed rate for up to 5 years.
BankSA Unsecured Fixed Rate Personal Loan
From 10.99% (fixed)
12.07%
$3,000
1 to 5 years
$12
$0 (On new loan applications before 18th January 2018.)
Take advantage of a competitive fixed rate and no application fee for a limited time.

Compare up to 4 providers

How does a personal loan work to finance a car?

Personal loans work in a very similar way to car loans to finance a car, with a few notable differences. The same as with a car loan, you apply with a personal lender for the amount you need (this amount can include purposes outside of your car finance, which car loans don't generally allow). A kew difference here is you don't need to supply details of the vehicle, you simply need to tell the lender what you plan to do with the funds.

Once you've received the loan amount you use it to purchase the vehicle yourself along with anything else you needed the loan for. Loan terms can be for between one and seven years and you can generally borrow between $3,000 and $70,000.

What are the benefits of using a personal loan?

While a car loan may be better suited in certain situations, personal loans do offer a range of benefits to those looking to finance a vehicle:

  • Flexibility with approved funds. The amount you can borrow with a car loan is generally tied to how much the car is. However, a personal loan is not, allowing you to borrow additional funds for insurance, modifications or even to consolidate other debt.
  • Buy a used car. While some car loan lenders will allow you to purchase a used vehicle (provided it's under a certain age), you can finance any car you want with a personal loan. This includes classic vehicles and used cars over the age limit.
  • Range of lenders. You may find a larger range of lenders and loan options if you opt for an unsecured personal loan from a bank rather than a car loan.

Buying situations and the financing options to consider

Not sure what type of finance to opt for? Consider the following situations:

  1. Buying a new car from a dealership. Here it may be better to opt for a car loan or dealership finance, unless you want to borrow above the cost of the car. You will be able to get a more competitive rate and may have access to convenient features.
  2. Buying a used car from a private seller. Depending on the age of the vehicle, you may be able to choose between a personal loan or a car loan. Keep in mind the restrictions and the costs of the loan when making your decision.
  3. Buying an encumbered vehicle. Some lenders will not finance a vehicle that is currently encumbered, that is, under a car loan.

How much does a personal loan cost?

Personal loans come with a variety of fees and charges that should be considered before you apply:

  • Interest rate. This rate can either be fixed or variable and can range from 7% p.a. to 20% p.a. depending on the type of loan you opt for and your borrowing situation.
  • Establishment fees. You may need to pay a fee to set the loan up. This can be called loan establishment fee, loan application fee or loan origination fee, but it will essentially be the same. Once the loan is approved the fee will be added to your borrowing amount.
  • Ongoing fees. Personal loans may come with monthly or annual fees that will increase your ongoing repayments. Make sure to consider these when comparing your options.
  • Late payment and default fees. If you make a loan repayment late or fail to make a repayment you will be charged additional fees. These may be daily late fees, direct debit dishonour fees and more. Make sure you get in touch with your lender if you think you'll be late with a repayment to avoid these.

What are the drawbacks of a personal loan?

Choosing a personal loan to finance a car isn't all positive. Here are some of the drawbacks to consider:

  • Costs. Compared to a car loan, you will generally find personal loans have higher interest rates.
  • No special car offerings. As car loans are designed for car purchases, lenders offer features such as car-buying services or car insurance add-ons which you can consider. These generally aren't available with personal loans.

How to decide what's right for you

Finding the right financing option comes down to costs, features and flexibility. First, make sure the loan type suits your purchase. Then, consider the features that are available with each loan, do these suit your needs? After this compare the costs of the most suitable loan options and select the most affordably on your budget.

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