What’s Better – Personal Loan or Car Finance in Australia?

đŸ€” Choosing Between Car Finance and a Personal Loan?

If you're looking to buy a vehicle, you might be wondering: should I apply for a personal loan or a car loan?
While both can technically be used to purchase a car, they’re not created equal — especially when it comes to interest rates, approval criteria, and how lenders view your application.

Let’s break it down.

🚗 What Is a Car Loan?

A car loan is a secured loan where the vehicle acts as collateral. That means:

  • Lower interest rates (typically 1–3% lower than unsecured loans)

  • The car can be repossessed if you default

  • Limited to car purchases (not usable for other expenses)

If you're focused on the best rate and want to keep repayments low, a car loan is likely your best bet.

💳 What Is a Personal Loan?

A personal loan is unsecured — no asset backs it. It offers:

  • More flexibility (can be used for holidays, weddings, or even renovations)

  • Higher risk for lenders → higher interest rates

  • Sometimes harder to get approved if your credit or income is borderline

Unless you’re planning to borrow for multiple purposes at once, most Aussies find dedicated car finance more efficient.

🧠 Which Is Easier to Get?

Criteria Car Loan (Secured) Personal Loan (Unsecured)
Interest Rate ✅ Lower ❌ Higher
Approval Time ✅ Often faster ✅ Similar
Credit Requirements ✅ Slightly more flexible ❌ Tighter
Repayment Term ✅ Longer (3–7 yrs) ✅ Often 1–5 yrs
Suitable For Renters ✅ Yes ✅ Yes

If you’re renting or recently moved house, car lenders will still consider you — especially if you have consistent income. Learn more here:
👉 Can Renters Get Car Finance in Australia?

đŸ‘·â™‚ïž What If You’re Self-Employed?

Both options are available, but you might benefit from a low doc small business car loan if you're trading on an ABN.

Wondering if GST is required?
👉 Is GST Registration Required for ABN Car Finance?

✅ Final Verdict

If you're buying a car — and nothing else — a dedicated car loan is usually the smarter, cheaper option.
Personal loans are better suited if you're bundling multiple expenses together or don’t want the car to be tied to the loan.

🚀 See What You Qualify For

Want to compare options without hurting your credit?
👉 Check your eligibility in 60 seconds

DISCLAIMER

The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.

 

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All Your Questions Answered

What is a car loan and how does it work?

A car loan is a finance product where a lender provides funds for you to purchase a vehicle, which you repay over time with interest.

What’s the difference between secured and unsecured car loans?

Secured loans use the car as collateral, often leading to lower interest rates. Unsecured loans don’t, but usually have higher rates.

What loan terms are available for car finance?

Most car loans offer terms from 3 to 7 years. Find out what term suits you best.

How is interest calculated on a car loan?

Interest is based on the loan amount, term, and rate. Fixed-rate loans have predictable repayments, while variable rates can change.

Can I get a car loan for a private sale?

Yes, many lenders accept private sellers. You’ll need to provide extra documents.

Do government employees get lower interest rates on car loans?

Yes — many lenders offer better rates due to your stable income. Explore finance options for government employees.

Can I apply for a car loan while on probation?

Yes. Many workers are approved during probation.

What credit score do I need as a government employee?

A score of 650+ is ideal, but lower scores may still be considered.

Are corporate professionals eligible for low-rate finance?

Yes, especially if you're full-time with strong income.

Can I get car finance with a novated lease?

Yes, many government departments support novated leasing.

Can I get a car loan with no credit history?

Yes, it's still possible to get a car loan with no credit history.

What if I’ve been declined elsewhere?

A broker can help restructure your application for better results.

How do I check my credit score?

Use Equifax, Experian, or Illion for a free check.

Can I get finance if I have a current personal loan?

Yes, if your income supports both loans. A broker will assess your capacity.

What documents do I need to apply?

Typically: ID, payslips, and bank statements.

Can casual workers get car loans?

Yes, if you’ve worked consistently for 6+ months.

Can I apply if I’m self-employed with an ABN?

Yes. Consider a low-doc loan.

Can Centrelink be used as income?

Yes, when paired with PAYG income.

What’s the minimum income to qualify for car finance?

Most lenders prefer $30,000+ annually, but this varies.

Can I apply on a fixed-term contract?

Yes, especially if it’s government-backed.

Can I finance a used car?

Yes, most lenders allow used cars under 10 years old.

Can I get a loan for an SUV or family car?

Absolutely

Can I finance a caravan or motorbike?

Yes

Can I finance an EV or hybrid car?

Yes. You may even qualify for green car loan discounts.

Can I use my car for both work and personal use?

Yes you can.

What is a balloon payment?

It’s a lump sum due at the end of the loan term.

Can I make extra repayments?

Yes, many lenders allow this without penalty.

Can I pay off the loan early?

Yes — ask if there’s an early payout fee.

Is there a deposit required?

Not always.

What loan terms are available?

1 to 7 years is standard.

How long does approval take?

24–48 hours in most cases

Can I apply online?

Yes — most lenders and brokers accept online applications.

Is a broker better than going direct?

Often, yes. They can compare lenders for you.

Can I get pre-approved?

Yes — and it gives you better negotiating power at the dealership.

What happens after I apply?

Your documents are reviewed, and if approved, the lender issues funds to the seller.

Can I get a loan with a visa?

Yes, in some cases. see finance for visa holders here.

Do I need a driver’s licence to apply?

Yes, but learners may qualify with a co-applicant.

Can I apply with someone else?

Yes, joint applications are allowed.

Can I refinance my current car loan?

Yes — it can lower your repayments or get you a better rate.

Can I trade in my old car as a deposit?

Yes, many lenders accept trade-ins toward the deposit.

Can nurses get car finance?

Yes — see nurse-specific finance tips.

Can teachers apply while on contract?

Yes. Read how to get approved.

Do defence personnel get special car loan rates?

Yes, in some cases. Your job security is a major advantage.

Can FIFO government workers apply?

Yes — consistency in income matters more than job location.

Can I apply if I’m on maternity leave?

Yes, especially if you’re returning to work. Here’s how.

Can I use car finance to buy interstate?

Yes — just make sure the seller provides all required documents.

Can I finance a car from an auction?

Yes, but only through select lenders. Ask your broker first.

Will applying hurt my credit score?

Only if you apply to multiple lenders directly. Brokers help protect your score.

Can I get a car loan if I’ve been bankrupt before?

Yes — see bad credit car loan options.

What if I want to upgrade my car before the loan ends?

You can sell the car, pay off the loan early, or refinance.