ask the expert Personal or car loan?

I am 22 and would like to buy an affordable second-hand car. I am currently caught up between deciding to get a personal loan or car finance. You would be more likely to get a car loan than a personal loan. The reason for this is that with a car loan the debt is secured by the asset, namely the car. If you default on the loan, then the bank can offset its costs by selling the car. A personal loan is just that, personal, so you could use the money to buy anything you wanted.

So if you defaulted on that loan, the bank would be more at risk as it is not attached to an asset. The interest rate charged on a personal loan is also much higher than a car loan. So your best bet is a car loan.

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