When you’re financing a car, the first real decision is whether to use a car loan or a personal loan — and the difference affects your interest rate, your repayments and even what happens if things change down the track. A car loan is secured against the vehicle you’re buying; a personal loan is usually unsecured and can be spent on anything. That single distinction drives most of the trade-offs below.
The short answer
For most people buying a car, a secured car loan is cheaper because the lender can rely on the vehicle as security, which lowers their risk and your rate. A personal loan makes more sense when the car can’t be used as security — for example, an older vehicle a lender won’t secure, a private sale with complications, or when you want to borrow a bit extra for on-road costs and repairs.
Side-by-side comparison
| Car loan (secured) | Personal loan (usually unsecured) | |
|---|---|---|
| Security | The car secures the loan | Typically no security |
| Interest rate | Generally lower | Generally higher |
| What you can buy | The vehicle (and sometimes on-roads) | Almost anything |
| Vehicle age limits | Lenders may cap the car’s age at term end | More flexible on older cars |
| If you miss payments | Lender can repossess the car | No car at risk, but still a default |
| Best when | Buying a newer car you’ll keep | Older/uninsurable car, extra costs, private quirks |
Rates shown as “lower/higher” are general — your actual rate depends on the lender, your profile and the car. Any figures we quote are examples only and subject to change.
When a car loan wins
- You’re buying a newer or dealer vehicle the lender will happily secure.
- You want the lowest repayment for the amount borrowed.
- You’re comfortable the car acts as security for the loan.
- You may want features like a balloon payment to lower monthly repayments.
If that’s you, the mechanics of secured lending — and how it compares to an unsecured structure — are covered in our secured vs unsecured car loan guide.
When a personal loan wins
- The car is too old or otherwise won’t be accepted as security.
- It’s a private sale with title or roadworthy complications.
- You want to borrow a little extra for registration, insurance or immediate repairs.
- You value the flexibility of an unsecured facility and accept the higher rate.
What lenders look at either way
Whichever path you choose, approval comes down to the same fundamentals: your income and stability, existing commitments, credit history, and — for a car loan — the vehicle itself. Our guide on what lenders look for when approving car finance walks through how to present a strong application.
How Alpha390 helps
Rather than apply to one bank and hope, Alpha390 compares options across a panel of lenders and matches your situation — new or used, secured or unsecured — to the structure that costs you least. Visit our car finance page or apply online and we’ll do the legwork.
Frequently asked questions
Is a car loan cheaper than a personal loan?
Usually, yes. A car loan is secured against the vehicle, which lowers the lender’s risk and typically means a lower interest rate than an unsecured personal loan for the same borrower.
Can I use a personal loan to buy a car?
Yes. A personal loan can fund a car purchase and isn’t tied to the vehicle, which helps when the car is older, a private sale, or when you want to borrow extra for on-road costs — but expect a higher rate than a secured car loan.
Does a car loan or personal loan affect my credit differently?
Both are reported to credit bureaus and both require a credit check. The bigger practical difference is security: a car loan puts the vehicle at risk if you default, while a personal loan does not — though a default harms your credit either way.
Which is better for an older or cheap car?
Often a personal loan, because lenders may not secure a car past a certain age. If the vehicle can’t be used as security, an unsecured personal loan may be the only practical route.
Can I refinance a personal loan into a car loan later?
Sometimes. If you started with a personal loan on an eligible vehicle, you may be able to refinance into a cheaper secured car loan. It depends on the car’s age and your circumstances at the time — talk to a broker before assuming.
Written and reviewed by the Finance Director at Alpha390 Finance.
This article is general information only and does not constitute credit or financial advice. Alpha390 Finance operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Lending is subject to approval, lending criteria, terms, conditions and fees. Any rates or repayments mentioned are examples only and subject to change; comparison rates depend on individual circumstances.
