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Can I get a loan against my car?

Jodie Humphries avatar
Jodie Humphries
- 6 min read
Can I get a loan against my car?

If you’re going through a cash-crunch, taking a loan with low interest rates could be an option to consider. You may be able to use your car as security for a loan in Australia.

Doing this may help you get approval for your loan faster as the car acts as a collateral and security. Plus, you may get a longer term and lower interest rates. So, instead of selling your car for funds, you could consider using your current car as collateral to take out a personal loan.

How to get a loan using your car as security

If you’re looking for a loan and wanting to use your car as security, the process is pretty simple. The first step you should take is to find lenders who offer these loans. Next, you'll want to compare the loans to find one that best suits your needs. Then you’ll have to fill out the application, including your personal details and the details of your car.

Once you have submitted your application, a representative from the lender will likely contact you to assist you with the final steps and documentation. The lender will assess your borrowing ability and then will let you know if your loan is approved.

Make sure to check all the details of the loan before applying, as some lenders require you to keep your car for the duration of the loan. Other lenders may allow you to sell your car as long as you have another car or asset they can use as security.

What is the eligibility criteria to get a loan against your car in Australia?

Each lender will often have its own eligibility criteria. Still, there are some general factors that each lender uses for eligibility. A few of them include, you must:

  • Be 18 years old or above
  • Be a permanent Australian resident or have a proper visa as proof of residence
  • Show details of your income
  • Allow access to your credit score
  • Provide details of your assets and liabilities
  • Provide details of your history of savings
  • Provide details of your car make, model, age and current condition

Although your credit rating or credit score is often part of a lender's decision-making process, having a low score may not always disqualify you from getting loans. You may just have to search a little longer for a lender or be restricted on the loans offered to you. All these eligibility criteria can vary depending on the provider and the state where you live.

Using your car equity to get a personal loan

If you’re looking at taking out a personal loan, there is the option to take out a personal loan and secure it against your car. It’s not a common practice and is offered by only a handful of lenders, but it is an option. As it’s not common, it means you might have to spend a considerable amount of time finding a lender that provides this type of loan.

The good news is that when you apply for a personal loan secured against a car, you stand a chance of getting it at a lower interest rate compared to an unsecured loan. However, the interest rate isn't the sole factor to look at when choosing a loan. You should also consider things like what fees you have to pay and other associated costs when shopping for a personal loan.

The loan amount you’re likely to get approved for will directly depend on your car's current value. Before taking out this sort of loan, you should remember that you might risk losing your vehicle if you fail to repay.

Using your car equity to get another car loan

If you’re looking to purchase another car, you can use your current car as equity when getting a loan to make the purchase. This process is the same as applying for any car loan. The key difference is that you’ll have your existing car as security. 

This type of car loan can be used to buy a new or used car. However, the amount will depend on the car make and model and your borrowing capacity.

Whichever loan type you choose, you should consider using a loan calculator to help you better understand how much you’ll have to pay over the life of the loan.

Selling your car after getting a loan against it

There may come a time when you want to sell your car, whether it’s to upgrade or because you need some extra cash. But, if you’ve taken out a loan against it, selling the car might not be as easy as you’d expect. First things first, if you’re planning to sell your car with a loan against it, call your lender and discuss your intentions with them to find out what you need to do. Typically, you have two options:

Option 1: Upgrade with the dealer

If you want to sell your car to upgrade to a different model, chat to the dealership if you’re purchasing from a dealership, as they might be able to help you out with this. Dealers make a considerable amount of money on financed deals along with the margins for selling the cars. They might be able to get you a loan to pay out your car’s outstanding balance along with covering the cost of the new car. Ensure to check all the details of the loan before signing. If you’re not purchasing from a dealership, this isn’t the option for you.

Option 2: Sell the car to pay off your loan

Discuss whether you can sell your car and use the proceeds to pay off the loan amount with your lender. If the car’s value isn’t enough to match the loan amount, you might have to pay for the gap yourself. Also, keep in mind that you might have to pay a fee if you’re paying off your loan before the loan term is over.


This article is over two years old, last updated on December 13, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent car loans articles.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.