14% of Australians have taken out a car loan according to Finder's Consumer Sentiment Tracker, but how does that compare to using a personal loan to purchase your car?

What’s the difference between a car loan and a personal loan?

The exact terms of your financing will depend on your chosen lender and product, but you can generally expect to find the following features with each type of loan.

Essentially, you could think of car loans as “pre-made packages”, while personal loans are more flexible and can be tailored to your needs.

Which is better, a car loan or a personal loan?

Whether a car loan or a personal loan is better will depend on your personal situation. The pros and cons outlined above will affect different people differently.

Questions to ask yourself before submitting a loan application

If you're wondering what you should ask yourself before you click "submit" on that loan application, you might try asking yourself these questions first.

• Are you expecting your financial situation to change?

If you’re anticipating a change in your financial situation in the near future, there’s a good chance a personal loan is preferable for you. An unsecured loan may carry less risk in an uncertain future and if you opt for variable rates, you’ll likely be able to take advantage of additional repayments without penalty.

• Do you know what car you want to buy?

Pre-approval is generally only available with car loans. This means that if you want to shop for a car knowing how much you have to spend, you may want to opt for a car loan.

• Are you buying a used car?

Buying used instead of new can be an effective way of saving money, but depending on the vehicle, you might not be able to find a car loan. So, you'll should possibly go for a personal loan instead. For example, some car loans will require the vehicle to be less than two years old, while personal loans will not have any such restrictions.

• Do you have bad credit?

Bad credit car loans are available, but you’ll find more options with a bad credit personal loan.

• Do you want to detail your car?

It can be costly to make modifications to your vehicle. Whether it’s just a new coat of paint or as extensive as changing the body of the car, many car lenders will not let you add this cost onto your loan. With a personal loan, you can borrow however much you like for different purposes. And you can add the cost of modifications onto the loan amount yourself.

Compare car loans and personal loans

For more information on any of these loans, simply click "More Info" to be taken to our review page. To apply for a loan, click "Go to site".

• Car loans
• Personal loans

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Name	Interest Rate (p.a.)	Comp. Rate (p.a.)	Application Fee	Monthly Fee	Monthly Repayment
Simplify New Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.19% to 18%	Comp. Rate (p.a.) 6.6% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $622.21	Go to siteMore Info Compare
loans.com.au - New - Variable Rate Special Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 6.24% to 7.74%	Comp. Rate (p.a.) 7.36% to 8.85%	Application Fee $400	Monthly Fee $8	Monthly Repayment $630.83	Go to siteMore Info Compare
IMB New Car Loan Fixed1 - 7 Years $2,000 - $125,000	Interest Rate (p.a.) 6.24%	Comp. Rate (p.a.) 6.59%	Application Fee $274.78	Monthly Fee $0	Monthly Repayment $619.01	Go to siteMore Info Compare	You'll receive a fixed rate of 6.24% p.a. A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one that's up to two years old.
OurMoneyMarket New Car Loan ($5,000-$100,000) Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.57% to 18.99%	Comp. Rate (p.a.) 7.19% to 21.78%	Application Fee $250 min.	Monthly Fee $0	Monthly Repayment $622.82	Go to siteMore Info Compare
Stratton Finance New Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.52% to 18%	Comp. Rate (p.a.) 6.95% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $625.27	Go to siteMore Info Compare	You'll receive a fixed rate from 6.52% p.a. depending on the lender you are approved with. Apply for up to $300,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
RACV New Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.29% to 16.99%	Comp. Rate (p.a.) 8% to 17.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $635.67	Go to siteMore Info Compare	You'll receive a fixed rate from 7.29% p.a. A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.
OurMoneyMarket Used Car Loan ($5,000-$100,000) Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.57% to 18.99%	Comp. Rate (p.a.) 7.19% to 21.78%	Application Fee $250 min.	Monthly Fee $0	Monthly Repayment $622.82	Go to siteMore Info Compare
Simplify Used Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.19% to 18%	Comp. Rate (p.a.) 6.6% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $622.21	Go to siteMore Info Compare
Stratton Finance Used Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.52% to 18%	Comp. Rate (p.a.) 6.95% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $625.27	Go to siteMore Info Compare	You'll receive a fixed rate loan from 6.52% p.a. with a comparison rate of 6.95% p.a. A used car loan of up to $300,000 with quick approval times and balloon payment options.
loans.com.au - Variable Rate Used Car < 5 years Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.74% to 7.74%	Comp. Rate (p.a.) 8.85% to 8.99%	Application Fee $400	Monthly Fee $8	Monthly Repayment $644.82	Go to siteMore Info Compare
RACV Used Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 8.49% to 16.99%	Comp. Rate (p.a.) 9.21% to 17.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $647.01	Go to siteMore Info Compare	You'll receive a fixed rate from 8.49% p.a. Benefit from no ongoing fees, 5-hour approval and a 21-day satisfaction guarantee. Interest rate discounts for members.
loans.com.au - Fixed Rate Used Car < 3 years Fixed3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.59% to 8.79%	Comp. Rate (p.a.) 8.7% to 10.04%	Application Fee $400	Monthly Fee $8	Monthly Repayment $643.41	Go to siteMore Info Compare
Latitude Variable Rate Personal Loan Variable2 - 7 Years $5,000 - $70,000	Interest Rate (p.a.) 9.49% to 29.99%	Comp. Rate (p.a.) 10.37% to 30.69%	Application Fee $0	Monthly Fee $13	Monthly Repayment $653.57	Go to siteMore Info Compare	Special Finder offer: $395 establishment fee waived for approved personal loan applications submitted through Finder. Latitude may withdraw offer at any time. T&Cs apply.

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Name	Interest Rate (p.a.)	Comp. Rate (p.a.)	Application Fee	Monthly Fee	Monthly Repayment
Harmoney Unsecured Personal Loan Finder award winnerFixed3 - 7 Years $2,000 - $70,000	Interest Rate (p.a.) 5.76% to 24.03%	Comp. Rate (p.a.) 6.55% to 24.98%	Application Fee $275 - $575	Monthly Fee $0	Monthly Repayment	Go to siteMore Info Compare
NAB Personal Loan Unsecured Fixed Fixed1 - 7 Years $5,000 - $55,000	Interest Rate (p.a.) 8.49% to 20.49%	Comp. Rate (p.a.) 9.54% to 21.49%	Application Fee $250	Monthly Fee $10	Monthly Repayment	Go to siteMore Info Compare
NOW Finance No Fee Unsecured Personal Loan Finder award winnerFixed18 Months - 7 Years $5,000 - $50,000	Interest Rate (p.a.) 6.75% to 26.95%	Comp. Rate (p.a.) 6.75% to 26.95%	Application Fee $0	Monthly Fee $0	Monthly Repayment	Go to siteMore Info Compare
OurMoneyMarket Unsecured Low-Rate Personal Loan ($5,000-$75,000) Finder award winnerFixed1 - 7 Years $5,000 - $75,000	Interest Rate (p.a.) 6.57% to 18.99%	Comp. Rate (p.a.) 7.19% to 21.78%	Application Fee 1.50% - 6% min. $250	Monthly Fee $0	Monthly Repayment	Go to siteMore Info Compare
Latitude Variable Rate Personal Loan Variable2 - 7 Years $5,000 - $70,000	Interest Rate (p.a.) 9.49% to 29.99%	Comp. Rate (p.a.) 10.37% to 30.69%	Application Fee $0	Monthly Fee $13	Monthly Repayment	Go to siteMore Info Compare	Special Finder offer: $395 establishment fee waived for approved personal loan applications submitted through Finder. Latitude may withdraw offer at any time. T&Cs apply.
ANZ Fixed Rate Personal Loan Fixed1 - 7 Years $5,000 - $50,000	Interest Rate (p.a.) 7.49% to 19.99%	Comp. Rate (p.a.) 8.18% to 20.58%	Application Fee $150	Monthly Fee $10	Monthly Repayment	More Info Compare	Special Offer: Until 16 January, eligible borrowers of an ANZ personal loan can get $250 cashback and $150 application fee waived. Terms and conditions apply.
ANZ Variable Rate Personal Loan Variable1 - 7 Years $5,000 - $50,000	Interest Rate (p.a.) 7.49% to 19.99%	Comp. Rate (p.a.) 8.18% to 20.58%	Application Fee $150	Monthly Fee $10	Monthly Repayment	More Info Compare	Special Offer: Until 16 January, eligible borrowers of an ANZ personal loan can get $250 cashback and $150 application fee waived. Terms and conditions apply.
NAB Personal Loan Unsecured Variable Rate Variable1 - 7 Years $5,000 - $55,000	Interest Rate (p.a.) 8.49% to 20.49%	Comp. Rate (p.a.) 9.54% to 21.49%	Application Fee $250	Monthly Fee $10	Monthly Repayment	Go to siteMore Info Compare

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Frequently asked questions about car loans vs personal loans

• What are the disadvantages of buying a car with a personal loan?

  One of the disadvantages of buying a car with a personal loan is that interest rates might be higher, because you're not securing the loan against the car you're purchasing.

  You're also in danger of borrowing more than you need and putting yourself further in debt when you might not have needed the amount you borrowed.

  Another disadvantage is that a personal loan might need a little more planning. Whereas some car loan providers will arrange the finance for you while you are in the dealership.

• Which car loan is the cheapest loan?

  The lower the interest rate the cheaper the car loan. However, the lowest interest rate doesn't always mean the cheapest loan. If a loan comes with high fees, you could find yourself paying more than if you had gone with a slightly higher rate.

  It's also hard to call out the cheapest loan when interest rates can fluctuate. One lender's rates can vary from between 6% to 24%, so the cheapest loan for one person might not be the cheapest loan for another.

• What should I know about used car loans?

  Used car loans may carry higher interest rates to compensate for the reduced value of the vehicle over time, and there will be restrictions on the age of the car.

• Can I use the loan for non-vehicle expenses?

  Car loans are for cars only, while personal loans may be spent at your discretion. Consider the cost of car insurance, licensing and registration, fuel, maintenance, repairs and related costs as well as the price tag of the vehicle itself.

• Will I need to provide details of the vehicle for a personal loan?

  No. It’s standard practice for lenders to ask about the purpose of the personal loan, but no specific vehicle details will need to be supplied unless you apply for a car loan.

Written by

Elizabeth Barry

Lead Editor

Elizabeth Barry was the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review. See full bio

Elizabeth's expertise

Elizabeth has written 212 Finder guides across topics including:

• Banking
• Personal finance
• Investing