Unsecured Car Loan Guide

Information verified correct on October 26th, 2016

Want a more flexible financing solution for your vehicle purchase? Consider an unsecured car loan.

If you want to purchase a secondhand car, you want to use the loan amount to pay for something in additional to your vehicle, or you just don't want to risk attaching your vehicle as a guarantee, an unsecured car loan may be an option for you. This loan lets you purchase your vehicle, plus anything else you like, without attaching your car to the loan as security. Find out more about this loan, and if it's right for you, by reading our guide below.

HSBC Personal Loan

HSBC Personal Loan Offer

HSBC Personal Loan offer a low interest personal loan with a low ongoing fee and flexible repayment feature.

  • Interest Rate From: 11.99% p.a.
  • Comparison Rate: 12.54% p.a.
  • Interest Rate Type: Fixed
  • Application Fee: $150
  • Minimum Loan Term: 1 year
  • Maximum Loan Term: 5 year
  • Minimum Loan Amount: $5,000
  • Maximum Loan Amount: $50,000

Comparison of unsecured car loans

Rates last updated October 26th, 2016
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
HSBC Personal Loan
A competitive fixed interest rate loan with the option to make extra repayments. Min. income $30,000
From 11.99% (fixed) 12.54% $5,000 1 to 5 years $150 Go to site More
Latitude Personal Loans (Unsecured)
An unsecured loan designed for multiple purposes – renovating, buying a car or travelling. Funds can be in your count in as little as 24 hours.
From 13.99% (fixed) 15.2% $3,000 2 to 7 years $250 (Loans under $4000 - $140) Go to site More
CUA Fixed Rate Personal Loan
A competitive fixed-rate loan with flexible repayments that can help you consolidate debt or make a large purchase.
From 11.99% (fixed) 12.83% $1,000 1 to 7 years $120 Go to site More
ANZ Fixed Rate Personal Loan
A flexible loan option that lets you pay off your debt, buy a car, fix up your house or cover travel costs.
From 13.95% (fixed) 14.81% $5,000 1 to 7 years $0 Go to site More
IMB Unsecured Personal Loan
An unsecured loan offering from IMB with a competitive interest rate
From 11.69% (fixed) 13.09% $2,000 1 to 5 years $199 Go to site More
RACQ Unsecured Loan
An unsecured personal loan that lets you borrow funds for what you need. Repay the loan on terms up to seven years.
From 13.95% (fixed) 14.52% $5,000 1 to 7 years $378 Go to site More
SocietyOne Unsecured Personal Loan
Interest rates range from 7.9% p.a. to 24.25% p.a. Comp rate from 9.58% p.a. to 27.99% p.a. depending on your credit score
From 7.9% (fixed) 9.58% $5,000 2 to 5 years 2.5% (of loan amount) Go to site More
RateSetter Personal Loan
Ratesetter allow you to get a personalised rate based on your credit score.
From 9.42% (fixed) 9.42% $2,001 0.5 to 5 years $0 Go to site More
St.George Unsecured Personal Loan - Variable Rate
The Variable Rate Unsecured Personal Loan St.George lets you borrow up to $40,000 for a period of up to 7 years.
From 14.74% (variable) 15.61% $3,000 1 to 7 years $195 Go to site More

How does an unsecured car loan work?

There are two types of car loans – secured and unsecured. When you opt for an unsecured loan, you will have no restrictions in terms of the type of car you purchase or how you spend your loan amount. You will be able to borrow more to take out insurance or cover additional vehicle costs or any other purposes you choose, so long as the loan amount is affordable.

The loan is a higher risk for the lender because there is no guarantee attached, and so you should expect a higher interest rate than you would with a secured car loan. You may also be subjected to stricter eligibility criteria in terms of your own financial stability, but the car you are purchasing will not need to meet any criteria.

What are the types of unsecured car loans?

You can generally apply for either a car loan with a fixed or variable interest rate. Each one of these come with their own pros and cons. You will need to consider your personal and financial situation to see which type of unsecured car loan suits you best.

  • Fixed interest rate. This means that the interest rate that you have to pay each month for the whole duration of the loan does not change. This is important because it allows you to know exactly how much you have to pay each month. If your loan term is a period of five years, you can adjust your budget accordingly.
  • Variable interest rate. This means that the lender can change the interest rate anytime, in response to the monetary policy from the Reserve Bank of Australia (RBA). You could either end up paying more for your car, or less depending on the economical factors at the time.

How to compare unsecured car loans

There are many lenders ready for your business and offering promotional incentives, which is why finding the best product can be a very overwhelming process. But there are several simple things that you can do to make this choice easier.

  • Interest rate. The interest rate is the most important thing to take into account. Generally, the lower the rate, the lower your repayments will be. The first thing you should do is to compare the interest rate that different lenders offer by checking the "interest rate" column in our comparison table above.
  • Comparison rate. The comparison rate reflects the true cost of the loan because it takes into account the fees that are payable.
  • Fees. There are several fees that lenders may charge aside from the interest rate. For example, if you want to repay your unsecured car loan earlier than specified, but you may be charged for doing so, you may also be charged a fee for additional repayments. Application and monthly services fees are also common with car loans.
  • Additional repayments. Some lenders allow you to make additional repayments at no extra cost, some will charge a fee.
  • Redraw facility. Redraw facilities allow you to withdraw any extra repayments you’ve put into your car loan. This is particularly useful in emergencies when you may need the cash, but check if a fee or limit applies.

The benefits and drawbacks of a car loan that's unsecured

  • You don’t need to provide collateral against the loan amount, which means the loan process could be faster
  • The loan amount is more flexible because you can use it however you like, for debt consolidation or to use it to make a large purchase as well as to finance your car
  • As this is an unsecured car loan, the lender can choose to take your case to the court if you default on your repayments
  • The interest rates are higher than secured car loans because there is more risk for the lender
  • As the loan is a higher risk you may only be eligible for a lower loan amount

Things to avoid about unsecured car loans

With unsecured car loans, if you fail to make repayments the lender has no asset to sell, so it can take you to court. As the loan amount is more flexible and you can borrow more than the price of your car it's your responsibility not to apply for more than you need. Work out a budget to ensure you will be able to afford your repayments. These loans come with higher rates than secured personal loans, so take this into account before you submit your application.

Remember to always compare a range of options before applying. Our comparison tables can help you in this process

Frequently asked questions about unsecured car loans

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