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Unsecured car loans

Get the funds you need without restrictions on what type of car you can purchase.

If you want to purchase a new or used car, but don’t want to use the vehicle as security against the loan, an unsecured car loan may be a better choice.

Our guide gives you the lowdown on unsecured car loans, so you know exactly what’s involved. You can also compare a number of unsecured car loan options below.

Unsecured car loans comparison

For more information on any of these loans, simply click “More Info” to be taken to our review pages. To apply for a loan, click “Go to site.”

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Establishment Fee
FROM 6.99%
The Co-operative Bank Unsecured Personal Loan
6.99% - 19.99%
$3,000
$50,000
6 months to 5 years
$200
Eligibility: Be 18+, an NZ citizen/permanent resident, or have a valid work visa.
Floating-rate, unsecured personal loans from $3,000.
CarFinance2U Car Loan
8.95% - 23.95%
$5,000
N/A
1 - 5 years
N/A
Eligibility: Be at least 21 years old, have a valid NZ driver's licence and be an NZ citizen or permanent resident.
With a CarFinance2U secured or unsecured car loan you could get pre-approval for your next car in 30 minutes.
Nectar Unsecured Car Loan
8.95% - 29.95%
$1,000
$25,000
6 months - 4 years
$240
Eligibility: Must be 18+, an NZ citizen or permanent resident, have an income of $400 per week or more (after tax) and a stable credit history.
Unsecured car loans from $1,000 with payouts made within one day of approval. Applications entirely online.
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What is an unsecured car loan?

An unsecured car loan is one which allows you to purchase a vehicle without attaching the car itself as security. With these type of loans, lenders typically don’t restrict the type of vehicle you can buy, such as it being under a certain age or of a specific value.

However, an unsecured car loan is riskier for the lender because there is no security attached, so you should expect a higher interest rate than you would with a secured car loan. You may also be subject to stricter eligibility criteria regarding your financial stability.

Is an unsecured car loan right for me?

An unsecured car loan is an option to consider in a few situations:

  • You’re purchasing an older or second-hand car. An unsecured car loan can give you more flexibility for the age and type of car you want to buy. Secured car loans often come with restrictions regarding the type of vehicle you can use as security, and have limitations on the maximum age limit.
  • You want to borrow funds for two or more purposes. If you’re borrowing money to buy a car, as well as consolidate debt, or to purchase your rego or even to get the vehicle modified, an unsecured car loan may work better for you. With a secured car loan, you can typically only borrow the value of the car, so the lender is sure it can recoup its cost if you default on the loan.
  • You don’t want to use your car as security for the loan. Using your vehicle as a guarantee for a loan can give you access to lower interest rates and also help you to receive approval. However, if you don’t want to risk losing your vehicle if you default on the loan, you may want to opt for an unsecured loan.

Unsecured vs secured car loans: The benefits and drawbacks

BenefitsDrawbacks
Unsecured car loans
  • No restrictions on the type of car you purchase.
  • You can use the funds for other purposes.
  • Interest rates are higher than with secured car loans.
  • More stringent eligibility criteria for the loan as it is more of a risk for the lender.
  • You don’t get access to features available with most car loans, such as pre-approval.
Secured car loans
  • Lower rates than unsecured car loans.
  • You may have a better chance of receiving pre-approval as the loan is less risky for the lender.
  • Your car must meet the lender’s eligibility criteria.
  • You may not be able to borrow above the value of the car.

How to take out an unsecured loan to buy a car

The borrowing process may differ slightly between lenders, but typically you need to take the following steps when financing your vehicle with an unsecured loan:

  1. Find your vehicle. It’s good to get an idea of what kind of car you want to buy and how much it costs before you start looking for a loan. Even if you don’t settle on a specific vehicle, get a ballpark figure so you can start comparing your loan options.
  2. Work out what repayments you can afford. How much can you comfortably repay each month? Remember to take into account the on-road costs for your new vehicle.
  3. Compare unsecured car loans. Now it’s time to start your comparison. Look at how competitive the interest rate is and check for upfront and ongoing fees. Finally, check for features that are important to you, such as repayment flexibility or the ability to repay the loan early. See our “how to compare” section below for more information.
  4. Check that you are eligible. Lenders have set minimum eligibility criteria that you need to meet to receive approval for a loan, which typically includes: a minimum age requirement, minimum income, credit history conditions and employment requirements. If you are unsure if you meet any of the set criteria, contact the lender directly.
  5. Apply for the loan. Once you’re sure you meet the minimum requirements you can click “Go to Site” to apply online. Have your ID, financial and employment documents on hand to complete the application.
  6. Organise your funds with the lender. Lenders disperse funds in different ways. It may prefer to pay the car seller directly or send the funds to your bank account. Discuss the best way to receive the funds with your lender.

What should I look out for in an unsecured car loan?

Here is what to look at when comparing your options:

  • Interest rate. The interest rate is the essential thing to take into account. Typically, the lower the rate, the lower the repayments are. The first thing you should do is to compare the interest rate different lenders offer by checking the “interest rate” column in our comparison table above.
  • Fees. Look for up-front costs, such as application or establishment fees, plus ongoing charges such as monthly or annual fees. You may also find fees for additional payments or repaying the loan early which can make it restrictive, so check if these apply.
  • Repayment flexibility. Most lenders let you choose between weekly, fortnightly or monthly repayments. Check whether you can make additional repayments and repay the loan early without penalty.

Summary: What to remember about unsecured car loans

  • Interest rates are higher than secured car loans.
  • There are no restrictions on the car you can purchase.
  • There may be more stringent eligibility criteria.

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