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Buying a car should be exciting, but we understand it can be daunting, especially if you’re wondering how to get a car loan and it’s your first time through this process. That’s why we’ve put together this step-by-step guide to walk you through it.

Step 1: Understand what a car loan is

When you buy a car, there are several ways you can pay for it, and getting a car loan is one of these ways. You can get a new car loan or a used car loan – and depending on the age of the car you’re purchasing, there are different loan options. It works like this: you borrow money to buy the car, and then pay it back over a set length of time, along with the interest that you’re charged. When you take out a car loan, you have to pay back more than just the amount you borrowed — you have to pay off interest as well. The length of time is called the loan term and is how long it will take you to pay off the loan without any extra repayments. At People’s Choice, our car loan terms are up to seven for unsecured loans or 10 years for secured loans.

What else to look for in a car loan

Make sure you check for any fees, if they’re upfront or ongoing, and whether you’ll be charged if you pay off the loan early. Different car loans have different features that you’ll want to compare to find the one that suits you best. Features include things like:

  • Flexibility to make additional repayments and pay off your loan earlier
  • Flexibility to make repayments weekly, fortnightly or monthly
  • Redraw option
  • Pre-approval
  • Whether the car needs to be used as security for the loan


Step 2: Learn about the different types of car loans

Two common sets of terms that differentiate car loans are: (1) secured vs unsecured and (2) fixed vs variable interest rates.

Secured vs unsecured

We have an entire article that breaks down secured vs unsecured car loans, but in a nutshell: for secured car loans you offer up an asset you own (for example, the car you’re buying) as security, while for an unsecured loan you do not provide security over an asset.

Offering a security can potentially apply a lower interest rate, but it depends on the terms of the loan. At People’s Choice we have secured and unsecured personal loans available. If you’re buying car that is over seven years old, you will need to opt for an unsecured loan.

Fixed vs variable interest rates for a car loan

A car loan with a fixed interest rate guarantees that your rate will stay the same for a fixed period of time. This is a great way to budget as your repayments won’t change. Some loans will be fixed for the life of the loan, and some can be fixed for a set period of the total loan term.

With a variable rate, the interest rate moves in line with the market. This means your repayment amounts may change over time. The change may or may not be to your advantage – this is the risk you take by choosing a variable rate loan. At People’s Choice, our secured personal loan offers a set interest rate fixed for the first five years, then reverts to a variable rate for the remaining term up, to 10 years.

Step 3: Check how much you can afford

Any loan is a commitment, so while working out how to get a car loan, remember to budget and calculate how much you can afford to pay in repayments for your car loan. To get started, use our handy personal loan calculator, and check out our article which can help you calculate how much you can borrow for your car loan.

At People’s Choice, we offer an unsecured loan from $2,000 and up to $40,000, plus we have a secured loan from $20,000. You can compare them here.

Step 4: Check your car loan eligibility and what you need to provide

Before you get a car loan, you’ll need to meet some eligibility criteria. Here are some questions People’s Choice will ask first up:

Are you aged 18 years or older?
Are you an Australian citizen, or otherwise a permanent resident in Australia?
Applying for a personal loan will trigger a credit check, which may have impacts to your credit score — are you ok with that?
If you didn’t answer yes to all of those, you might have trouble applying for a car loan. There are some things lenders can’t budge on, for example, the minimum age for a personal loan in Australia is 18 years old. 

Lenders like us also have strict legal obligations to comply with, including to ensure we lend money responsibly.

Other things you’ll need to provide which will determine your car loan eligibility:

  • Details about your income and employment
  • Details about your expenses and liabilities (such as any outstanding balances and limits you have on a credit card or other debt through buy now pay later services)
  • Details about your assets (such as how much savings you have)

Applying for a loan affects your credit score

Your credit score is a number on your credit report and is based on personal and financial information about you which helps lenders assess your application. You can see your own credit score using any of the tools listed here.

Each time you apply for a loan, a lender makes a credit enquiry that's recorded on your credit report, and potentially impacts your credit score.

It's important to do your research based on your circumstances and reasons for a loan, and to choose a lender that suits your own requirements

Step 5: Apply and get pre-approval

If you’ve already done your research and want to apply for a car loan, you can check out our personal loans and apply online today. We have pre-approval available which is valid for 90 days.

Step 6: Get car insurance

Got your car loan and your new car? Congrats! If you need insurance, you can learn more about what’s included in comprehensive car insurance and get a quote online now. If you’re using your car as security for your loan, car insurance will be required so this should be considered as part of the overall financial commitment.

Thinking of a loan to finance your new car? Take a look at our personal loans and find the right one for you!

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