Compare finance types
Personal car loan vs personal loan: which is right for your business?
The main difference between a personal car loan and a personal loan is security: a car loan is secured by the vehicle you are buying, which lowers the rate but allows repossession on default, while a personal loan is usually unsecured and priced higher because the lender has no asset to recover.
Car loan vs Personal loan at a glance
| Personal car loan | Personal loan | |
|---|---|---|
| What it is | A personal car loan is a consumer loan used to buy a vehicle for private use, secured by that vehicle and regulated under the National Consumer Credit Protection Act. Because it is regulated credit, lenders must verify your income and expenses, quote a comparison rate, and assess whether the loan is not unsuitable for you. | A personal loan is a fixed-term consumer loan for personal purposes such as renovations, medical costs, a wedding or debt consolidation, usually unsecured and regulated under the National Consumer Credit Protection Act. Lenders must verify your income and expenses and quote a comparison rate before you commit. |
| Amount | $5,000 – $150,000 | $3,000 – $100,000 |
| Term | 12–84 months | 12–84 months |
| Indicative rate | 6.5% – 18% p.a. | 7% – 25% p.a. |
| Rate type | Fixed | Fixed |
| Security | Secured by the asset | Unsecured (guarantee may apply) |
| Repayments | Weekly, fortnightly or monthly | Weekly, fortnightly or monthly |
| Typical speed | 2–5 business days | 1–5 business days |
| Best for | Individuals buying a car for private use who want secured pricing and regulated protections | Individuals funding a defined personal expense who want a fixed end date to the debt |
| Consider the other if | Vehicles used predominantly for business, where business vehicle finance is usually better value | Business purposes, which need business lending, or ongoing shortfalls that credit cannot fix |
| Tax | Interest on a private-use vehicle loan is not deductible. Where the car is partly used for work, speak to your accountant about apportioning. | Interest on borrowing for private purposes is not tax deductible. |
| Security | The vehicle being purchased | Usually none |
| Indicative rate range | Roughly 6.5–18% p.a. | Roughly 7–25% p.a. |
| What the funds can be used for | The vehicle only | Almost any personal purpose |
| Risk on default | The vehicle can be repossessed | No asset attached, but the debt is still enforceable |
| Regulation | NCCP regulated consumer credit | NCCP regulated consumer credit |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a personal car loan
A personal car loan is usually the better fit for individuals buying a car for private use who want secured pricing and regulated protections. Its main advantages are materially cheaper than unsecured personal lending, full nccp consumer protections including hardship provisions, fixed repayments and a comparison rate for honest comparison. Consider the alternative if vehicles used predominantly for business, where business vehicle finance is usually better value.
When to choose a personal loan
A personal loan is usually the better fit for individuals funding a defined personal expense who want a fixed end date to the debt. Its main advantages are fixed term means the debt has a defined end date, usually cheaper than credit card interest, full nccp protections including hardship provisions. Consider the alternative if business purposes, which need business lending, or ongoing shortfalls that credit cannot fix.
Our verdict
If you are buying a vehicle that meets lender age criteria, a secured personal car loan is almost always cheaper and is the sensible choice. Use an unsecured personal loan when the purchase is not a financeable asset, when the vehicle is too old to secure, or when you specifically want to avoid the lender holding security over the car.
Both products are regulated consumer credit, so both require the lender to verify your income and expenses, assess that the loan is not unsuitable for you, and disclose a comparison rate alongside the advertised rate. That common ground makes them genuinely comparable — you can put the two comparison rates side by side and the total repayable will tell you the truth.
The gap is typically two to six percentage points in the car loan’s favour, which on a $35,000 five-year loan is several thousand dollars. That is the price of the lender being able to repossess the vehicle. Where the car is older than a lender will secure, or where the loan also needs to cover registration, insurance and a holiday, the unsecured personal loan wins on practicality rather than price.
Personal car loan
A personal car loan is a consumer loan used to buy a vehicle for private use, secured by that vehicle and regulated under the National Consumer Credit Protection Act. Because it is regulated credit, lenders must verify your income and expenses, quote a comparison rate, and assess whether the loan is not unsuitable for you.
Personal loan
A personal loan is a fixed-term consumer loan for personal purposes such as renovations, medical costs, a wedding or debt consolidation, usually unsecured and regulated under the National Consumer Credit Protection Act. Lenders must verify your income and expenses and quote a comparison rate before you commit.