What is a personal loan and how does it work?
A personal loan (also known as an unsecured car loan) involves a finance company lending you the money to purchase a vehicle for personal use. Although you’ll make regular loan and interest repayments over a period agreed with your finance company, you will own the vehicle from the time of purchase, due to the fact that the loan is not secured against the vehicle.
What are the benefits of a personal loan?
- Flexible loan repayment periods, ranging from two to 10 years
- The option to reduce monthly repayments by setting a final balance (Residual Value) payment
- Simple approval criteria
- The option to put down either a lump sum or your current vehicle as a deposit to reduce the amount borrowed
- The potential to claim tax deductions if the car is being used for business purposes
What tax and GST can I expect to pay on a personal loan?
A personal loan is classed as a personal finance product, however, it may still be possible to claim a tax deduction on your payments, depending on how frequently you use your vehicle for business purposes. For more information about claiming vehicle-related tax deductions, please visit the ATO website.
Who should choose a personal loan?
A personal loan is a good option for those looking to purchase a vehicle that may not meet the criteria outlined for a secured car loan, for example, an old or low value vehicle. However, a car loan or novated lease is generally a cheaper finance option to consider.