Compare unsecured car loans

What is an unsecured car loan?

There’s technically no such thing as an ‘unsecured car loan’–the term actually refers to an unsecured personal loan that you take out to buy a car. Unsecured personal loans can be used for a variety of other purposes as well, like going on a holiday, renovating your home, or consolidating debt.

What makes an unsecured personal loan different to a dedicated ‘car loan’ is that you don’t have to offer an asset (like the car you’re buying) as a security. This means the lender can’t repossess your asset to recoup their costs if you’re unable to make your repayments. Though, you may be taken to court if you don’t repay the funds.

For this reason, lenders may consider unsecured loans riskier than secured ones, and may charge higher interest rates.

How do unsecured car loans work?

Unsecured car loans work much the same as standard personal loans:

• You’ll need to give a lender information about your financial situation when you apply.
• If you’re approved, the lender will send you the borrowed funds, which you can use to buy the vehicle.
• You’ll then make regular weekly, fortnightly, or monthly repayments. These repayments cover both the principal repayments (the original amount borrowed) and interest charged by your lender.
• You may also be charged application and ongoing fees.
• You’ll continue to make repayments until you completely repay the amount you initially borrowed, plus interest. 

What is the difference between secured and unsecured car loans?

Secured car loans

• Require an asset (like the vehicle itself) to act as a security for the loan.
• Your lender can repossess your asset if you’re unable to make your repayments.
• You’ll generally need to give your lender details about the vehicle you intend to buy, usually by supplying a dealer invoice or contract of sale, which should outline the vehicle’s VIN and registration details.
• Often restricted to new or near-new vehicles.
• May require you to take out comprehensive car insurance on the vehicle you’re purchasing.
• The lender will usually only lend you enough to cover the cost of the vehicle.

Unsecured car loans

• Doesn’t require an asset to be used as a security.
• Lenders will often charge higher interest rates due to this lack of security.
• You usually won’t have to provide information about the vehicle you’re buying.
• Can be used to buy new and used vehicles.
• Generally no additional car insurance requirements.
• You may be able to borrow more than the cost of the vehicle.

How is interest charged on unsecured car loans?

Unsecured car loans can come with either fixed or variable interest rates. A fixed interest rate won’t change during your loan term, meaning the size of your repayments will stay the same.

Variable interest rates can change over time. While the size of your repayments can fluctuate with variable rates, variable loans often come with useful features, like redraw facilities and options to help you pay off your loan faster.

Where can you find the best unsecured car loan?

The ‘best’ unsecured car loan for you will come down to your own personal needs and financial situation. Here are a few things to think about when comparing different unsecured car loans:

• Fees and charges: Some loans come with application and ongoing fees, so it’s important to read the loan’s Key Facts Sheet and Product Disclosure Statement (PDS), or ask the lender what fees you might be charged.
• Interest rate: The interest rate of a loan refers to the amount of interest (expressed as a percentage per year) you’ll be charged on the balance of the loan.
• Comparison rate: Lenders are required to display a comparison rate alongside a loan’s interest rate. The comparison rate takes into account both the interest rate and certain fees, giving you a clearer picture of the true cost of a loan.
• Fixed or variable interest: A fixed interest rate will remain the same for the term of the loan, while variable rates can go up and down depending on market forces and your lender’s decisions.
• The term of the loan: This is the amount of time you have to repay the loan. Personal loans typically have terms of between one to seven years, but this can vary.

You can also use Canstar's personal loan calculator to get a better idea of your potential repayments and how the interest rate, loan amount, or term length could affect them.

Once you know what you’re after, you can use the comparison table above to view a variety of unsecured car loans from our Online Partners. Use the table’s filters to narrow down the available options to those that best suit your needs. 

You can also click the ‘GET RATE ESTIMATE’ button at the top of the page to find loan products you’re likely eligible for. Simply provide information on how much you want to borrow, your ideal loan term, the purpose of the loan, your employment, residency, and residential status, and either link your credit score or estimate your credit band. If you’re unsure of your credit score, you can check it for free with Canstar or via the Canstar App.

Am I eligible for an unsecured car loan?

Unsecured car loans have similar eligibility requirements to regular personal loans. You’ll have to be:

• At least 18 years or older
• An Australian citizen or permanent resident
• Employed or have a steady source of income to repay the loan with
• Have a suitable credit history

Some providers may have additional eligibility requirements, such as a minimum annual income or particular credit score.

How to apply for an unsecured car loan

Most lenders have an online application form on their website. To apply for an unsecured car loan, you’ll need to provide information such as:

• Photo ID like a driver’s licence or passport and supporting documents like your Medicare or bank card.
• Proof of income, typically in the form of payslips or your annual tax return.
• Proof of savings, typically in the form of bank statements.
• Your employment details for the past three years.
• A list of any assets you already own, including vehicles and property.
• A list of debts you already have, such as other personal or home loans, credit card debts, and outstanding buy now pay later (BNPL) balances.
• A list of your general living expenses, including groceries, utilities, streaming services, rent, medical and transport costs, and education fees.

You may not need to provide all of this information, but it’s good to have on hand just in case.