If you need a car but can’t pay for it upfront, you have two main options: take out a personal loan or get car finance.
Both allow you to spread the cost, but they work differently. If you’re unsure which one is easier to get, understanding how each works can help you choose the right option.
Car Finance vs a Loan – What’s the Difference?
A personal loan is money borrowed from a bank or lender. You receive a lump sum, use it to buy a car, then repay the loan in fixed monthly instalments with interest. Since this loan isn’t linked to the car, you own the vehicle from the start and can sell it whenever you like.
Car finance is a loan specifically for buying a car. Instead of receiving the money, the lender pays the dealership directly. You then repay the amount in monthly instalments, plus interest. The lender owns the car until you finish all payments. If you stop making payments, they can take the car back.
The most common types of car finance are:
Hire Purchase (HP) – You pay a deposit, make fixed monthly payments, and own the car once you make the final payment.
Personal Contract Purchase (PCP) – You pay lower monthly instalments and choose at the end whether to pay a lump sum to keep the car or return it.
Both options let you spread the cost, but one may be easier to get than the other.
Car Finance vs a Loan – Which One is Easier to Get?
Personal Loans
Banks and lenders check your credit score before approving a personal loan. If you have a strong credit history, you’re more likely to get approved with a lower interest rate.
No deposit needed – You borrow the full amount.
Full ownership – The car is yours from day one.
Fixed repayments – You know exactly what you’ll pay each month.
However, if your credit score is low, getting a loan can be difficult. Banks have strict lending criteria, and they often run hard credit checks, which can affect your score. If you don’t meet their requirements, they may reject your application or offer a loan with high interest rates.
Car Finance
Car finance is often easier to get, even if your credit score isn’t perfect. Since the car acts as security, lenders take on less risk than with an unsecured loan.
More flexible approval – Lenders consider more than just your credit score.
Lower upfront cost – Some deals require little or no deposit.
Quicker application – Many lenders offer instant decisions.
Because the lender owns the car until you make all payments, they have more control. If you miss repayments, they can repossess the car. This makes car finance more accessible for people with bad credit, as lenders face less risk compared to a personal loan.
Car Finance vs Personal Loans – A Quick Comparison
Feature
Car Finance
Personal Loan
Credit Score
More flexible, easier for poor credit
Higher credit score needed for approval
Ownership
Lender owns car until last payment
Borrower owns car from the start
Deposit
Often required, but some deals don’t need one
No deposit needed
Approval Speed
Faster, often with soft credit checks
Longer process, hard credit check required
Risk
Car can be repossessed if payments stop
No repossession risk, but affects credit score
Flexibility
Only for car purchases
Can be used for anything
Which One Should You Choose?
The best option depends on your situation.
A personal loan might work better if:
You have a good credit score and want lower interest rates.
You want to own the car immediately.
You prefer borrowing money that can be used for other things as well.
Car finance might be a better choice if:
You have a lower credit score and find it hard to get a personal loan.
You want smaller monthly payments and don’t mind not owning the car straight away.
You want a quicker, more flexible approval process.
