Short answer: A personal loan can make sense if the car is old, bought privately or doesn't meet a lender's rules for security. For most newer cars, a secured car loan is often cheaper because the car backs the loan. The right choice depends on the car, your credit and how flexible you need the loan to be.
The key difference: security
A secured car loan uses the car as security. If you stop paying, the lender can repossess it. Because the lender's risk is lower, rates are often lower too. A personal loan may be secured or unsecured. An unsecured personal loan isn't tied to any asset, so it's often priced higher, and the lender relies more heavily on your income and credit history.
Side by side
| Secured car loan | Unsecured personal loan | |
|---|---|---|
| Typical pricing | Often lower | Often higher |
| Vehicle age limits | Common. Many lenders cap the car's age at the end of the term. | Usually none, since the car isn't security |
| Private sales | Possible, with extra checks | Simple, as funds go to you |
| Insurance requirement | Comprehensive insurance usually required | Up to you (still sensible) |
| Loan amount | Linked to the car's value | Linked to your income and credit |
| Balloon option | Often available | Rarely |
What a rate difference costs
Example only: borrowing $20,000 over 5 years at 9% p.a. works out at about $415 a month, or roughly $4,910 in interest. At 14% p.a. it's about $465 a month and roughly $7,922 in interest. Fees aren't included, and these aren't current rates. Your actual rate depends on the lender and your circumstances.
When a personal loan may suit
- The car is older than the lender's security limit, or it's a classic or project car.
- You want to buy privately without the lender inspecting the car or its paperwork.
- You're also borrowing for other costs, like registration, repairs or a towbar, though that adds to what you repay.
- You have strong credit, so the rate gap may be smaller.
When a secured car loan is usually better
- You're buying a newer car from a dealer or privately.
- Your credit history is average or has some blemishes, since security can widen your options.
- You want a lower regular repayment using a balloon, as long as you have a plan for it at the end.
Before you choose
- Compare comparison rates, not headline rates.
- Check early repayment fees and whether extra repayments are allowed.
- Run a PPSR check on any used car so you don't inherit someone else's finance.
- Only apply once you've narrowed it down. Multiple applications can add enquiries to your credit file.
Not sure which loan fits your car? Tell us about your situation in about 60 seconds and a licensed broker will call you. No credit check to enquire.
Related guides
- Can you get an unsecured car loan?
- How to calculate the true cost of a car loan
- Loans for classic cars
General information only. This isn't financial advice. Finance the Ride is a referral service and doesn't hold an Australian Credit Licence. Last reviewed September 2026.
