Unsecured personal loans
Flexible, but usually the most expensive of the three.
- No security, so the car is yours outright and isn't at risk.
- You can buy any car, new or used, from a dealer or a private seller.
- Higher rates and lower limits, and harder to get with a poor credit history.
Secured personal loans
Secured against an asset, often the car you're buying, but the money can be used more widely.
- Lower rates than unsecured loans, close to car loans.
- Easier to get approved, including with average credit.
- Can take a little longer, as the lender checks the asset.
Car loans
A car loan is a secured loan for buying a vehicle, with the car as security.
- Usually the lowest rates, sometimes with dealer or carmaker offers.
- Higher limits and terms of up to seven years.
- The lender may limit the car's age, type or where you buy it.
- Some offer a balloon payment, which lowers repayments but leaves a lump sum at the end.
Which is better?
If you want the lowest rate and don't mind the car being security, a car loan or secured loan usually wins. If you're buying an older or unusual car, or want to own it outright from day one, an unsecured loan may be the simpler choice. Compare the comparison rate and the total cost over the term.