Car Loans Explained
Car Loans Explained
Small Cash Loans from $200 to $2,000 paid within 60 minutes
Loans from
$200
to $2,000
Paid within 60 minutes
Repay over 1–12 months
Weekly or fortnightly repayments
Loans from
$200
to $2,000
Paid within 60 minutes
Repay over 1–12 months
Weekly or fortnightly repayments
How Do Car Loans Work in Australia?
Buying a car is exciting, working out how to pay for it doesn't have to be stressful. If you're asking how do car loans work, the short answer is: you borrow a set amount to cover the cost of a vehicle, then repay it in instalments over an agreed term, usually with interest and fees added on top.
The details how much you can borrow, what it might cost, and how quickly you could be approved, depend on the lender, your circumstances, and the type of loan you choose.
This guide walks through the mechanics of car loans in Australia: how repayments are worked out, the difference between secured and unsecured loans, what lenders typically look for, and how to apply.
Ready to get started? You can begin your application at any point there's no obligation to finish reading first.
How Car Loans Actually Work
At its core, a car loan is a lump sum you borrow from a lender to buy a vehicle, which you then pay back over time through fixed or variable repayments. Most car loans are made up of a few moving parts:
- The loan amount
how much you borrow, based on the vehicle's price (and your deposit, if you're putting one down)
- The interest rate
the cost of borrowing, charged as a percentage of the outstanding balance
- The loan term
how long you have to repay, which can range from a few months to several years depending on the lender and loan size
- Fees
this may include an establishment fee, ongoing account-keeping fees, or early repayment fees, depending on the lender and loan product
Once approved, the lender typically pays the loan amount out (either to you or directly toward the vehicle purchase), and you start making regular repayments weekly, fortnightly, or monthly until the loan is paid off.
Secured vs Unsecured Car Loans, What's the Difference?
Car loans generally fall into one of two categories:
Secured car loans
use the vehicle itself (or another asset) as collateral. Because the lender has security to fall back on if repayments aren't met, secured loans may come with comparatively lower interest rates, though this isn't guaranteed and depends on the lender's assessment.
Unsecured car loans
don't require collateral, which can make them more accessible for some borrowers, but they may carry higher interest rates to offset the lender's additional risk.
New Car Loans vs Used Car Loans
The type of vehicle you're financing can also shape your loan options.
Financing a New Car
New car loans are generally used to finance vehicles straight from a dealership. Depending on the lender, new car finance may come with more favourable terms, since newer vehicles typically hold their value for longer and can offer stronger security for a secured loan.
Financing a Used Car
Used car loans work in much the same way, but terms can vary depending on the vehicle's age, condition, and value. If you're after finance for a pre-loved vehicle, it's worth exploring our used car finance option, which is designed around the needs of used-car buyers specifically.
Am I Eligible for a Car Loan?
Eligibility criteria differ from lender to lender, but most will assess factors such as your income, existing expenses, employment status, and credit history. Having a less-than-perfect credit history doesn't automatically rule you out some lenders, including CashDirect, may still be able to help depending on your overall circumstances, though outcomes are assessed on a case-by-case basis.
What You'll Need to Apply?
While requirements vary by lender, you'll typically need to provide proof of identity and evidence of your income or financial situation. You can check the documents you'll need before you start, so your application has everything it needs from the outset.
How to Apply, Step by Step
Work out how much you need to borrow, based on the vehicle's price and any deposit you're putting down.
Compare your loan options, including secured versus unsecured, and fixed versus variable rates where offered.
Gather your documents — typically ID and proof of income or financial circumstances.
Submit your application, either online or over the phone.
Wait for assessment — approval times can vary depending on the lender and complexity of your application, and may be faster for straightforward applications.
Review your loan offer carefully, including the rate, fees, and repayment schedule, before accepting.
Finalise the paperwork and, once approved, use the funds toward your vehicle purchase.
Car Loans for Centrelink, Pensioner and Bad Credit Applicants
Not every borrower fits the standard mould, and CashDirect works with a broader range of applicants than some mainstream lenders. If you receive Centrelink payments, are a single parent, or are a pensioner, you may still be eligible for finance you can find out more about pensioner car finance and how it's assessed.
Similarly, if past credit issues have made it harder to get finance elsewhere, it's worth looking into our bad credit car loan options eligibility is assessed individually, and a less-than-perfect credit history doesn't automatically mean you'll be declined.