Buying a Car with a Personal Loan

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

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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 financeAny vehicleNew 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

RateSetter Unsecured Personal Loan - 3yr Variable

RateSetter Unsecured Personal Loan - 3yr Variable

From

6.89 % p.a.

variable rate

From

8.89 % p.a.

comparison rate

  • Get a personalised comparison rate based on your credit score
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RateSetter Unsecured Personal Loan - 3yr Variable

RateSetter offers this unsecured personal loan with a fixed or variable rate. Receive a tailored interest rate from 6.89% p.a. based on your risk profile.

  • Interest rate from: 6.89% p.a.
  • Comparison rate: 8.89% p.a.
  • Interest rate type: Variable
  • Application fee: $299
  • Minimum loan amount: $2,001
  • Maximum loan amount: $45,000
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Comparison of Personal Car Loan Interest Rates

Updated December 12th, 2019
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
RateSetter Unsecured Personal Loan - 3yr Variable
From 6.89% (variable)
8.89%
$2,001
6 months to 5 years
$299 (Based on $10,000)
$0
You'll receive a variable rate between 6.89% p.a. and 16.4% p.a. based on your risk profile
A flexible loan with amounts from $2,001 and terms starting from 6 months. Interest and comparison rates calculated for a loan term of 3 years.
Harmoney Unsecured Personal Loan
From 6.99% (fixed)
7.69%
$2,000
3 to 5 years
$500 ($200 for loans of below $5,000)
$0
You'll receive a fixed rate between 6.99% p.a. and 28.69% p.a. based on your risk profile.
Apply for a loan up to $70,000 and repay your loan over 3 or 5 years terms.
Pepper Money Unsecured Fixed Rate Personal Loan
From 8.95% (fixed)
10.56%
$5,000
18 months to 7 years
4% of the loan amount, capped at $495
$13
You'll receive a fixed rate between 8.95% p.a. and 16.95% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.
Symple Loans Personal Loan
From 5.75% (variable)
6.89%
$5,000
1 to 7 years
from 1% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 19.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
CUA Unsecured Fixed Rate Personal Loan
9.89% (fixed)
10.14%
$5,000
1 to 7 years
$175
$0
You'll receive a fixed rate of 9.89% p.a.
An unsecured loan from $5,000 with flexible repayments and no monthly fee.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
9.51%
$5,000
2 to 5 years
from 3% of loan amount
$0
You'll receive a fixed rate between 7.5% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
NOW FINANCE Personal Loans
From 8.95% (fixed)
10.56%
$5,000
18 months to 7 years
$495 (Based on $10,000)
$13
You'll receive a fixed rate between 8.95% p.a. and 16.95% p.a. based on your risk profile
Apply for loans from $5,000 and get a dedicated loan manager. No security required. Note: Applicants approved before 31 December 2019 will receive a special offer $200 Coles Gift Card.
NAB Personal Loan Unsecured Fixed
From 10.69% (fixed)
11.58%
$5,000
1 to 7 years
$150
$10
You'll receive a fixed rate between 10.69% p.a. and 18.69% p.a. ( 11.58% p.a. to 19.53% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
Latitude Personal Loan (Unsecured)
From 13.99% (fixed)
15.19%
$3,000
1 to 7 years
$250 (Loans under $5000 - $140)
$13
You'll receive a fixed rate between 13.99% p.a. and 24.99% p.a. based on your risk profile
Apply for what you need from $3,000 and use it for a range of purposes. Flexible repayments options.
Australian Military Bank Fixed Rate Personal Loan
From 7.93% (fixed)
8.77%
$1,000
1 to 5 years
$500 (from $100 to $500)
$10
You'll receive a fixed rate between 7.93% p.a. and 18.87% p.a. based on your risk profile
An unsecured loan with a low minimum borrowing amount and flexible repayment options.
Latitude Low Rate Personal Loan (Unsecured)
10.99% (fixed)
12.21%
$20,000
1 to 7 years
$250
$13
You'll receive a fixed rate of 10.99% p.a.
A secured or unsecured loan available to homeowners with a large minimum borrowing amount of $20,000. Benefit from flexible repayments and fast approval.
St.George Unsecured Personal Loan - Fixed Rate
From 11.49% (fixed)
12.57%
$2,000
1 to 5 years
$195
$12
You'll receive a fixed rate between 11.49% p.a. and 17.4% p.a. based on your risk profile
A low minimum borrowing amount of $2,000 to fund a range of purposes.
Nimble Personal Loan
From 8.99% (fixed)
10.31%
$5,000
6 months to 4 years
$250 ($195 For Loans $5000 to $10000)
$0
You'll receive a personalised rate of between 8.99% p.a. and 29.99% p.a. based on your risk profile.
Borrow up to $25,000 over a 4 year loan term.
CUA Unsecured Variable Personal Loan
11.89% (variable)
12.15%
$5,000
1 to 7 years
$175
$0
You'll receive a variable rate of 11.89% p.a.
Borrow from $5,000 with the option for flexible repayments and no monthly fees.
CUA Discount Variable Personal Loan (Loans over $30,000)
10.89% (variable)
11.15%
$30,000
1 to 7 years
$175
$0
You'll receive a discounted variable rate of 10.89% p.a.
Borrow over $30,000 and receive a discounted interest rate. No monthly fees and a redraw facility also available.
NAB Personal Loan Unsecured Variable Rate
From 10.69% (variable)
11.58%
$5,000
1 to 7 years
$150
$10
You'll receive a variable rate between 10.69% p.a. and 18.69% p.a. ( 11.58% p.a. to 19.53% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes. Benefit from fee-free additional repayments and a redraw facility. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
Australian Military Bank Variable Rate Personal Loan
From 7.88% (variable)
8.72%
$1,000
1 to 7 years
$500 (from $100 to $500)
$10
You'll receive a variable rate between 7.88% p.a. and 18.82% p.a. based on your risk profile
An unsecured loan with flexible repayment options and a low minimum borrowing amount.
Westpac Unsecured Personal Loan
11.99% (fixed)
13.15%
$4,000
1 to 7 years
$250
$12
You'll receive a fixed rate of 11.99% p.a.
Benefit from the security of a fixed rate with the flexibility of additional repayments.
St.George Unsecured Personal Loan - Variable Rate
From 12.99% (variable)
14.06%
$2,000
1 to 7 years
$195
$12
You'll receive a variable rate between 12.99% p.a. and 18.9% p.a. based on your risk profile
A low minimum borrowing amount of $2,000 plus the convenience to make extra repayments and redraw them if you need them.

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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.

Picture: Shutterstock

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