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
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Name	Interest Rate (p.a.)	Comp. Rate (p.a.)	Application Fee	Monthly Fee	Monthly Repayment
Stratton Finance New Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 5.9% to 18%	Comp. Rate (p.a.) 6.33% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $619.53	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
loans.com.au - New/Demo - Variable Rate Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 5.99% to 7.14%	Comp. Rate (p.a.) 7.12% to 8.27%	Application Fee $400	Monthly Fee $8	Monthly Repayment $628.52	Go to siteMore info Compare
Great Southern Bank Fixed Rate Car Loan Fixed1 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 6.29% to 12.99%	Comp. Rate (p.a.) 6.75% to 13.48%	Application Fee $325	Monthly Fee $0	Monthly Repayment $621	Go to siteMore info Compare
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 1.5% - 6%	Monthly Fee $0	Monthly Repayment $622.82	Go to siteMore info Compare
RACV New Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 6.99% to 17.99%	Comp. Rate (p.a.) 7.69% to 18.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $632.86	Go to siteMore info Compare
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 1.5% - 6%	Monthly Fee $0	Monthly Repayment $622.82	Go to siteMore info Compare
Stratton Finance Used Car Loan Fixed1 - 7 Years $10,000 - $300,000	Interest Rate (p.a.) 6.59% to 18%	Comp. Rate (p.a.) 7.91% to 23%	Application Fee $395	Monthly Fee $0	Monthly Repayment $625.92	Go to siteMore info Compare
loans.com.au - Variable Rate Used Car < 5 years Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.14% to 7.14%	Comp. Rate (p.a.) 8.27% to 8.41%	Application Fee $400	Monthly Fee $8	Monthly Repayment $639.2	Go to siteMore info Compare
RACV Used Car Loans Fixed1 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 8.19% to 17.99%	Comp. Rate (p.a.) 8.9% to 18.77%	Application Fee $499	Monthly Fee $0	Monthly Repayment $644.16	Go to siteMore info Compare
loans.com.au - Variable Rate Used Car < 3 years Variable3 - 7 Years $5,000 - $150,000	Interest Rate (p.a.) 7.14% to 7.14%	Comp. Rate (p.a.) 8.27% to 8.41%	Application Fee $400	Monthly Fee $8	Monthly Repayment $639.2	Go to siteMore info Compare

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Product	Interest Rate (p.a.)	Comp. Rate (p.a.)	Application Fee	Monthly Fee	Monthly Repayment
Harmoney Unsecured Personal Loan Fixed3 - 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 $623.70	Receive competitive interest rates tailored to your personal circumstances, repay the loan early without incurring an early repayment fee, and enjoy no monthly or annual fees.	Go to siteMore info Compare	loading Fetching your data...
NAB Personal Loan Unsecured Fixed Fixed1 - 7 Years $5,000 - $55,000	Interest Rate (p.a.) 7.49% to 20.49%	Comp. Rate (p.a.) 8.53% to 21.38%	Application Fee $0	Monthly Fee $15	Monthly Repayment $637.03	Special Offer: For a limited time NAB is waiving the $250 application fee when you apply for a NAB Unsecured Personal Loan. Offer valid from 6 March to 31 May 2025. Other fees and charges still apply.	Go to siteMore info Compare	loading Fetching your data...
NOW Finance No Fee Unsecured Personal Loan Finder AwardFixed18 Months - 7 Years $5,000 - $50,000	Interest Rate (p.a.) 6.45% to 26.95%	Comp. Rate (p.a.) 6.45% to 26.95%	Application Fee $0	Monthly Fee $0	Monthly Repayment $612.52	Go to siteMore info Compare	loading Fetching your data...
OurMoneyMarket Unsecured Low-Rate Personal Loan ($5,000-$75,000) ExclusiveFixed1 - 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 $627.42	Finder Exclusive: Limited time only. $100 eGift Card for borrowers with Excellent Credit who apply via Finder by 30 April and settle the loan by 15 May. Applicants with an Equifax credit score of 500 or above and an annual income of more than $25k are eligible. No ongoing or early exit fees. Loan amounts range from $5,000 to $75,000, and up to $100,000 for home improvement projects and motor vehicles.	Go to siteMore info Compare	loading Fetching your data...
Latitude Variable Rate Personal Loan Variable2 - 7 Years $5,000 - $100,000	Interest Rate (p.a.) 9.49% to 29.99%	Comp. Rate (p.a.) 10.93% to 31.38%	Application Fee $0	Monthly Fee $13	Monthly Repayment $653.57	Special offer: The $395 establishment fee is waived for approved personal loan applications. Latitude may withdraw the offer at any time. T&Cs apply.	Go to siteMore info Compare	loading Fetching your data...
Wisr Personal Loan Fixed3 - 7 Years $5,000 - $62,000	Interest Rate (p.a.) 6.74% to 24.54%	Comp. Rate (p.a.) 7.57% to 25.32%	Application Fee $595	Monthly Fee $0	Monthly Repayment $633.47	ContinueMore info Compare	loading Fetching your data...
MONEYME Personal Loans Variable3 - 7 Years $5,000 - $50,000	Interest Rate (p.a.) 5.99% to 24.49%	Comp. Rate (p.a.) 6.70% to 25.90%	Application Fee $0 - $495	Monthly Fee $10	Monthly Repayment $633.40	Go to siteMore info Compare	loading Fetching your data...
ANZ Fixed Rate Personal Loan Fixed1 - 7 Years $5,000 - $75,000	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 $636.70	Special Offer: Until 04 May, eligible borrowers of an ANZ personal loan can get $250 cashback and $150 application fee waived. Terms and conditions apply.	ContinueMore info Compare	loading Fetching your data...
NAB Personal Loan Unsecured Variable Rate Variable1 - 7 Years $5,000 - $55,000	Interest Rate (p.a.) 7.49% to 20.49%	Comp. Rate (p.a.) 8.53% to 21.38%	Application Fee $0	Monthly Fee $15	Monthly Repayment $637.03	Special Offer: For a limited time NAB is waiving the $250 application fee when you apply for a NAB Unsecured Personal Loan. Offer valid from 6 March to 31 May 2025. Other fees and charges still apply.	Go to siteMore info Compare	loading Fetching your data...
MoneyPlace Unsecured Personal Loan Fixed3 - 7 Years $5,000 - $80,000	Interest Rate (p.a.) 6.55% to 19.99%	Comp. Rate (p.a.) 6.55% to 21.49%	Application Fee 0% - 5.50%	Monthly Fee $0	Monthly Repayment $642.57	Go to siteMore info Compare	loading Fetching your data...

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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

Journalist

Elizabeth Barry is an experienced journalist with over 10 years of expertise in personal finance, contributing to outlets like the ABC, Sydney Morning Herald, and 7News. She holds a Master of Arts in Creative Writing and a Bachelor of Arts in Communication from the University of Technology Sydney, and has earned multiple award nominations, including a Highly Commended recognition at the 2017 Lizzies. Elizabeth began her career at Finder in 2013, progressing through roles to become Lead Editor, where she oversaw a wide range of personal finance coverage until 2024. See full bio

Elizabeth's expertise

Elizabeth has written 210 Finder guides across topics including:

• Banking
• Personal finance
• Investing