Unsecured Car Loans
Access unsecured financing with a car loan through Savvy.
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Looking for an unsecured car loan? Whether you’re looking to buy an older car outside your lender’s age criteria or a fixer-upper, there’s a range of finance options to compare before you sign on the dotted line.
With unsecured car loans available with competitive interest rates from a wide range of lenders, Savvy can help you buy the car that you’re looking for, no matter the age, make or model. Access the best unsecured financing available for your profile with us today and get a free, no-obligation quote!
What are unsecured car loans and how do they work?
An unsecured car loan is a type of consumer finance product where your car isn’t used as collateral or a security. Instead, a lender will determine eligibility using a borrower’s credit score or overall creditworthiness. This type of finance is the same as an unsecured personal loan.
In exchange for taking on more risk, your bank or lender will usually charge a higher interest rate in comparison to a secured car loan. There are two types of interest rate that can be charged on this loan:
- Fixed rate: this type of rate is set at the start of your agreement and remains in place throughout your term. This protects you from increases in interest while you’re repaying your loan.
- Variable rate: these are left open, allowing you to potentially take advantage of rate decreases should they fall while you’re repaying your loan. They’re also generally more flexible when it comes to repaying your loan early, although some fixed rate agreements will allow this.
Depending on your lender and profile, you can choose to repay your loan over as little as 12 months up to a maximum of seven years.
Who can access unsecured car loans?
As unsecured loans don’t put up your purchased asset as collateral, they're assessed based on your profile, with lenders drawing on factors such as your income, credit score and repayment history to help consider whether you're a good fit for approval. with this information, they’ll determine your overall creditworthiness, which is your suitability for a loan. You'll be subject to a range of eligibility criteria, including:
- You must be at least 18 years old
- You must be a citizen or permanent resident of Australia (though solutions exist for those on an eligible visa)
- You must be earning a stable income which is enough to support your repayments
- You must meet minimum credit score and credit file requirements (such as not having defaults, debt agreements or bankruptcies on your file)
Lenders may approve financing even for bad credit customers, but their interest rates will be significantly higher than those customers with good or excellent credit. At Savvy, we partner with flexible lenders who are able to approve loans for borrowers of a diverse range of profiles, so you can submit a quick quote with us today!
How can you tell if you have good credit?
In Australia, credit reporting agencies give customers a credit score based on creditworthiness. These range from 0 to 1200, with others using a 0 to 1000 scale. The following tables demonstrate how different credit reporting agencies assess this:
| Equifax | |
|---|---|
|
Below average |
0 – 459 |
|
Average |
460 – 660 |
|
Good |
661 – 734 |
|
Very good |
735 – 852 |
|
Excellent |
853 – 1,200 |
| Experian | |
|---|---|
|
Below average |
0 – 549 |
|
Fair |
550 – 624 |
|
Good |
625 – 699 |
|
Very good |
700 – 799 |
|
Excellent |
800 – 1,000 |
| illion | |
|---|---|
|
Zero |
0 |
|
Low |
1 – 299 |
|
Room for improvement |
300 – 499 |
|
Good |
500 – 699 |
|
Great |
700 – 799 |
|
Excellent |
800 – 1,000 |
Source: What is an Average Interest Rate on a Car Loan? – Savvy. Information correct as of April 2024.
Lenders reward lower risk borrowers with more competitive interest rates or access to specialised lending products. Higher risk borrowers may gain approval with a higher than usual interest rate.
Why should I consider a personal loan for my car?
If you have good or excellent credit, a personal loan may be an appealing alternative to a secured car loan as you won’t need to put up your car as security. In an unsecured loan, you’re at a lesser risk of losing your vehicle to repossession. However, you’ll likely pay more in interest and fees.
The lack of security requirement for unsecured personal loans also means that you won’t face any restrictions on the age of the car you can buy. Under a secured car loan, the vehicle has to retain some value if it’s to be repossessed and sold. Because of this, lenders will enforce a maximum age requirement, which can range from as little as seven years to as much as 20 or more.
Financiers may also be more reluctant to approve a loan for an older car as its likelihood of malfunction is increased compared to a brand-new or near-new vehicle. Because there aren’t any age obligations for unsecured finance, you have a greater range of cars to choose from.
They can also offer more flexibility than secured loans. Since they’re unsecured, you may be eligible to borrow more than the car’s value, which can be used to consolidate other debts. Some loans may also include redraw facilities, which allow you to withdraw any additional payments you’ve made from the loan.
How much can I borrow with an unsecured car loan?
Lenders will generally allow borrowers to access a maximum of $50,000 to $75,000 through unsecured car loans. However, the amount you’re able to borrow will depend on several other factors, including:
- Income and expenses: you’ll need to show that you have enough disposable income to support the repayments of the amount you’re applying for.
- Other liabilities: if you have other loan debts you’re paying off, this will be factored into your affordability calculations by your lender.
- Repayment history: if you’re repaid a similar loan in the past without any trouble, your lender may be more likely to approve your application.
- Credit score: the higher your credit score, the more likely you’ll be approved for a larger sum.
- Maximum and minimum loan amount: your lender will have a set maximum and minimum loan amount. For instance, the minimum can vary from as little as $2,000 to $10,000, while the maximum can be set at $50,000 to $75,000.
How much will my unsecured car loan cost?
Unsecured loans tend to cost more than secured loans, due to the higher interest rates charged on these agreements. The following table shows how much an unsecured loan may cost compared to a secured loan:
| Unsecured loan | Secured loan | |
|---|---|---|
|
Loan amount |
$30,000 |
$30,000 |
|
Interest rate |
9.00% p.a. |
7.50% p.a. |
|
Establishment fee |
$300 |
$150 |
|
Monthly payments |
$629 |
$605 |
|
Total cost |
$37,739 |
$36,249 |
As you can see in the table above, a rate 1.50% p.a. lower and an establishment fee $150 cheaper will lead to a saving of almost $1,500 for the example loans listed above. However, there’s a range of other factors aside from interest and fees that impact your loan’s cost, including:
- Loan size: larger loans will attract more interest than smaller ones.
- Loan term: the longer your loan term, the more interest you’ll be charged.
- Additional repayments: paying above the minimum required amount will clear your debt sooner and reduce your total interest bill.
- Balloon payment: by attaching a balloon to your loan, you’ll pay less each month but more interest overall.
How should I compare unsecured car loans?
There’s a variety of factors to consider when comparing your different unsecured loan options. These include:
- Maximum and minimum loan amount: make sure the amount you’re looking for is offered by your lender.
- Interest rate: interest rates are crucial to compare when choosing your ideal loan option.
- Comparison rate: a loan’s comparison rate includes both interest and fees, so it’s a more accurate representation of its cost.
- Available loan terms: consider how long you wish to take to repay your loan and make sure your lender offers it.
- Repayment flexibility: check whether you’ll be able to make free additional payments and if you’ll have any break fees associated with clearing your debt early.
- Additional features: some loans come with other handy features, such as redraw facilities, which may be handy for your loan.
Trust Savvy with your unsecured car loan
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Savvy helps Australians gain approval for unsecured personal loans. Our diverse lender panel helps you choose with confidence.
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The pros and cons of unsecured car loans
PROS
Suitable for cars of any age
If you’re looking to buy an old car outside your lender’s criteria or one in less-than-ideal condition, you’re more likely to be approved for an unsecured loan than secured.
Fast online approval and funding
Because of the lack of security requirement on your loan, they can often be faster to process, approve and settle. There’s no need to assess the suitability of your collateral.
Flexible borrowing
The amount you’re able to borrow isn’t tied directly to the value of your vehicle, so you can put forward as large a deposit as you’d like or borrow above its price and cover other costs.
CONS
Higher interest and fees
A lack of security brings higher interest rates and fees, as can be seen in the table above. As a result, you could pay hundreds, if not thousands, more over your term.
Lower borrowing range
Unsecured loans are generally capped at no more than $75,000, which is much lower than most secured loans. These typically allow you to borrow up to $100,000 or more, sometimes the full value of your car.
More reliant on your profile
Because there’s no collateral to fall back on, your profile needs to be squeaky clean if you want to secure the lowest available unsecured loan rate.
How to apply for unsecured financing with Savvy
Compare the best offers with Savvy
Before you start looking at applying anywhere, it’s important to start by comparing your personal loan options with Savvy.
This is a great way to give you an idea of the interest rates and fees you’re looking for, as well as other aspects such as loan term and features like free additional repayments.
Match with your ideal lender instantly
The whole application process begins with you telling us how much you’re looking for and why you need it. From there, our smart technology instantly matches you with one of our lenders based on the loan you’re looking for.
After telling them about the loan you want and your contact details, you'll complete the rest of your application via their online portal.
Gather the documents you’ll need
Once you’ve been connected with one of our lenders, you can start preparing the documents you’ll need to supply as part of your formal application. You’ll first need to supply identification documentation, which can come in the form of your passport, driver’s licence, Medicare card or a combination of multiple documents. You’ll also have to supply bank statements to show past borrowing and proof of employment and income (contract and payslips).
Send your application to your lender
This application should only take a matter of minutes to complete, after which you should receive an outcome from your lender within one day confirming whether your application was successful.
Sign your final loan agreement
If approved, you’ll be sent through a final loan agreement to sign. Before doing so, look over the document carefully and ensure you read all the fine print.
Once you’ve signed and sent back the application, your lender will settle the loan and advance the funds to you. This process can be turned around within one business day, potentially the same day of your application, making it faster than a standard car loan.
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