Buy a Car with a Personal Loan? Discover the Secret (2026)

Are you dreaming of getting behind the wheel of a new car but finding the financing options overwhelming? If you're considering a personal loan as a means to purchase your vehicle, you're not alone. Many Australians are exploring personal loans for car purchases due to their flexibility and competitive rates. However, understanding whether this is the right option for you requires navigating the current market landscape and aligning it with your financial situation.

Understanding Buying a Car with a Personal Loan

Buying a car is a significant financial decision, and financing options can be confusing. A personal loan offers a way to borrow a specified amount of money to be repaid over a fixed term with interest. Unlike car loans, personal loans are unsecured, meaning they aren't tied to the asset you're purchasing. This can offer more flexibility in terms of repayment and the ability to use the funds for other expenses, such as registration or insurance.

With a personal loan, you're borrowing money based on your creditworthiness, so factors like your credit score, income, and employment history will play a crucial role in determining your eligibility and interest rate. With Esteb and Co's access to 83+ lenders, you have a wide array of options to find a loan that fits your needs.

Rates, Requirements, and Options

Interest rates on personal loans can vary significantly based on your financial profile and the lender's criteria. As of 2026, personal loan interest rates in Australia typically range from 6.49% to 12%. For those with excellent credit scores, rates can be on the lower end, whereas those with lower scores might face higher rates.

When considering a personal loan for a car purchase, you should be aware of the eligibility criteria:

• Minimum age of 18 years
• Australian citizenship or permanent residency
• Stable employment and a steady income
• Good to excellent credit score
• Existing debts, if any, should not be overwhelming

Here’s a comparison of options available through Esteb and Co's lender panel:

Steps to Buying a Car with a Personal Loan

Here’s a step-by-step guide to help you navigate the process of buying a car with a personal loan:

1. Assess Your Financial Situation: Calculate how much you can afford to borrow and repay. Consider your monthly budget and existing financial obligations.
2. Check Your Credit Score: A higher credit score can qualify you for better rates. Obtain a copy of your credit report and address any discrepancies.
3. Research Lenders: With Esteb and Co’s access to 83+ lenders, compare interest rates, fees, and loan terms to find the best fit.
4. Apply for Pre-Approval: This can give you a better understanding of how much you can borrow and the interest rates you may receive.
5. Select Your Car: With a pre-approved loan, you can shop with confidence. Ensure the car fits within your budget and meets your needs.
6. Complete the Loan Process: Submit the required documentation to the lender, including proof of income, identification, and details of the car purchase.
7. Finalize the Purchase: Once the loan is approved, the lender will disburse funds, allowing you to complete the purchase and drive away in your new car.

Tips and Considerations

To make the most of your car purchase with a personal loan, consider the following expert advice:

• Compare Multiple Offers: Don’t settle for the first loan offer. Compare terms and conditions from different lenders to ensure you’re getting the best deal.
• Understand Fees: Be aware of any additional fees such as application fees, early repayment fees, or late payment penalties that may apply.
• Consider Loan Features: Some loans offer features like redraw facilities or the ability to make extra repayments without penalties, which can be beneficial.
• Stay Within Your Budget: It’s easy to be swayed by a more expensive car than you initially planned for. Stick to your budget to avoid financial strain.
• Use a Loan Calculator: Estimate your monthly repayments and total loan cost using online loan calculators to better plan your finances.

Frequently Asked Questions

1. Is it better to use a personal loan or a car loan to buy a car?

It depends on your situation. A personal loan offers flexibility and isn’t secured against the car, while a car loan might offer lower rates but uses the car as collateral.

2. Can I pay off a personal loan early?

Yes, but check your loan terms for any early repayment fees that might apply. Some lenders allow extra repayments without penalties.

3. How does my credit score affect my personal loan?

Your credit score impacts the interest rate you’ll qualify for. Higher scores often lead to more favourable rates.

4. Can I include car insurance in my personal loan?

Yes, many people use personal loan funds to cover additional costs like insurance, registration, and on-road costs.

5. What documents do I need for a personal loan application?

You’ll typically need identification, proof of income (like payslips), and bank statements. Specific requirements may vary by lender.

Buying a car with a personal loan can be a strategic choice, offering flexibility and control over your purchase. By understanding the ins and outs of personal loans and leveraging the wide selection of lenders available through Esteb and Co, you can make an informed decision that aligns with your financial goals.