Which one is right for you?


If you need a loan to buy a car, you will have to choose between an auto loan or a personal loan.

Although similar, one may suit your financial situation better than the other.

Discover the main differences here and which one is best for you.

Looking for a new car? The table below shows auto loans with some of the lowest fixed interest rates in the market.


Type of interest Vehicle type Maximum vehicle age Ongoing charges Registration fees Total refund Prepayment Instant approval Online application
Fixed New 4 years More details

Car loan (new and used dealer) (
  • 24 hour approval
  • Balloon options to reduce refunds
  • No ongoing charges, no discharge charges

Fixed New 2 years More details

Fast New Vehicle Loan Low Rate

  • Fast application process with no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars for up to 3 years

Fast New Vehicle Loan Low Rate

  • Fast application process with no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars for up to 3 years
Fixed New, used 99 years old More details
  • No additional refunds or early exit fees
  • Up to $ 75,000 in loan amounts
  • Financing approved within 24 hours
Fixed New, used 2 years More details

Special low rate auto loan offer

Rates based on a $ 30,000 loan for a five-year term. Products sorted by advertised price. Prices correct as of October 17, 2021. See disclaimer.

What is the difference between an auto loan and a personal loan?

A personal loan is a loan from a lender for the borrower to make a major purchase that they could not have financed on their own, such as renovations or vacations. An auto loan is a type of personal loan, specially designed for the purchase (you guessed it) of a car.

Personal loans can be secured or unsecured. An unsecured personal loan means that no collateral is provided for the loan, such as a deposit or an asset. A secured personal loan means that the lender has a collateral on the loan, for example, if you took out a secured personal loan to buy a car, the car would be the collateral. Therefore, a car loan is generally a type of secured personal loan.

So why would you use a personal loan to buy a car if you can just use a car loan? Excellent question! Lenders have strict criteria and restrictions on auto loans, and most likely will require you to use the car as collateral, meaning if you don’t pay it back, they can seize it. Lenders often don’t allow you to buy older or used cars, and there is a longer and more detailed approval process.

Personal loans do not always have these restrictions and some may not require any collateral. However, for this luxury, you will usually be subject to a higher interest rate on the loan, as unsecured loans present a higher risk to the lender. You also don’t have to say precisely what or how much you are buying with a personal loan, meaning you could borrow more than the cost of the car and use the remaining funds for another purchase.

Most auto loans have a fixed interest rate, while the number of fixed rate and variable rate personal loans available is fairly consistent. Fixed rates keep your repayments stable throughout the life of the loan, which makes things like budgeting easier, while variable rates might see your repayments go up and down.

Advantages and disadvantages of a car loan


  • Often have lower interest rates than personal loans

  • Usually have fixed interest rates, which gives you more certainty

  • Maybe be able to borrow more money

The inconvenients:

Advantages and disadvantages of a personal loan


The inconvenients:

How to know what’s right for you

If you are unsure whether you should get a car loan or a personal loan, ask yourself these questions first:

Do I know which car I want?

If you are going to a lender for a car loan, they may want to know all the details of the car before lending you the funds. They may require the make and model, the VIN number, or even the color. If you have this information, you can probably get a car loan. If you just want to get a loan and then buy a car, a personal loan can be faster. However, if you are looking to buy a car and still want a car loan, consider applying for pre-approval. This doesn’t guarantee you a loan, but it does give you an idea of ​​what the lender will lend you when you return the vehicle of your choice.

Is the car new or used and how old is it?

Some lenders will not allow you to use an auto loan to purchase a used car, while others may allow the car to be up to five years old. If you want to get a loan to buy a used or older car, you may have a better chance of getting approved with a personal loan.

How will my financial security be during the term of the loan?

Auto loans and personal loans typically have terms of one to five years, but can be up to seven years. If you know that you are going to have a stable income for the duration of your loan and that your situation is not likely to change, you can consider that a car loan is better for you than a personal loan. A car loan often has fixed repayments, which can make it easier for you to budget for that period because your repayments won’t change. A personal loan may be better suited if you know your circumstances are going to change, such as if you are planning to have a baby or buy a house. Personal loans are generally more flexible, so you could have higher repayments for a year or two and then revert to minimum repayments during your shift period. Personal loans usually do not charge you additional payments, unlike auto loans, and will charge you for prepayment of the loan.

Do I need to borrow more money than the car is sold?

If you are an enthusiast, you may be considering some modifications to your new wheels. If you don’t have the funds for it and need to borrow money, a car loan is unlikely to help. Auto loans are specifically for the purchase of the vehicle and nothing else, which is part of the reason the approval process is so rigorous. A personal loan is often not limited to individual purchases, which means you can borrow $ 5,000 more than the cost of the vehicle and put a dirty subwoofer in the trunk.

The two cents from Savings.com.au

It can be easy to confuse auto loans and personal loans, especially since auto loans are a type of personal loan.

However, choosing the wrong one can make your life very difficult.

If you want to buy a new car and want fixed repayments, a car loan may be the way to go.

If you want to buy a vintage or used car or need to borrow additional funds, a personal loan may be preferable.

photo by Arteum.ro to Unsplash

The entire market was not taken into account in the selection of the above products. Instead, a smaller part of the market has been envisioned, which includes the retail products of at least the Big Four Banks, the Top 10 Client-Owned Institutions, and Australia’s largest non-banks:

Products from some vendors may not be available in all states.

In the interest of full disclosure, Savings.com.au, Performance Drive, and Loans.com.au are part of the Firstmac group of companies. To learn more about how Savings.com.au handles potential conflicts of interest, as well as how we are paid, please click on the links on the website.

*The Comparison rate is based on a loan of $ 30,000 over 5 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different terms, fees, or other loan amounts may result in a different comparison rate.

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