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Cheap personal car loans
Find the cheapest car loans, from 5.9% for £7.5k+
Updated 16 January 2025
Personal loans are one of the cheapest ways to buy a car – and that's even considering that their rates have doubled in the past two years. So if you know what you're doing, you can go straight to our Loans Eligibility Calculator to find the lenders that are most likely to accept you. Or, if you need more help, our full guide will show you how personal car loans work, whether other car finance would work better, and the best-buy loans.
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What is a personal loan?
If you want to buy a new or used car and NEED to borrow, a personal loan allows you get the cash upfront and you can typically borrow more than with a 0% credit card.
Personal loans (or unsecured loans) are where you borrow a sum of money from a lender, and agree to pay the total amount back in fixed monthly payments over a set period of time, usually between one and five years. You'll be charged interest on the loan, based on a range of factors such as your credit score. Because interest increases the cost of borrowing, you should minimise the amount you borrow.
We list the cheapest rates below and our eligibility calculator will show you which loans you've the best chance of getting. For some it'll show if you'll definitely get the advertised rate, though for most it'll show though for most it'll show a representative example or 'representative rates' – meaning only 51% of successful applicants will get the rate that's advertised (so you could apply and be offered a more expensive rate).
Once you're accepted for a personal loan to buy a car, the cash is usually deposited into your nominated bank account, so you're then able to transfer the money over to the dealer to pay for your vehicle. You can drive away that day as the new owner of that car.
Pay just a penny with a credit card to get greater protection
If the seller accepts credit card, pay even a penny towards the car on it and you'll get powerful Section 75 protection (provided the car costs between £100 and £30,000). The credit card provider is then jointly liable with the car dealer should anything go wrong, so means it should be a lot easier to sort out any issues with the car further down the line.
What happens at the end of the loan?
Once you've made all the repayments, that's it. The lender marks the loan as settled on your credit file, and you have nothing left to pay.
How do personal car loan repayments work?
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You'll pay in monthly instalments. The majority of car loans are paid back in monthly instalments. How much these cost depends on factors including the overall loan amount, the interest rate and the loan term. The lengthier the loan term, the less you'll pay each month, but the longer you'll be doing so for, and the more interest will build up.
- You should set up a Direct Debit. Life is hectic, and it's easy for car loan repayments to slip your mind. But this can come back to bite you. Not only will missing a loan repayment harm your credit score, but potentially result in additional interest and late payment fees too. The simple solution to this? Setting up a Direct Debit. This way, you'll never have to worry about manually transferring money to the lender.
- You'll pay interest – known as APR. APR stands for annual percentage rate, which is the amount of interest charged on the loan agreement, plus any associated fees. The rate you'll pay is dependent on aspects such as the lender, how much you're borrowing and your credit score. Learn more about APRs in our Interest rates guide, and check out some examples of the kind of rates offered in the best-buy rates section below.
- You might be able to save by switching loan. Sometimes it's possible to save on interest by switching loan provider mid-term, if you can find another lender out there offering a better rate. However, you'll likely have to factor in an early repayment charge – see below – so to help, our loan cost calculator can show you if it's worth switching.
- You may want to pay off the loan early. If you've got the funds, an early loan repayment could save you paying significant interest. This typically involves an early repayment fee, which is usually based on one or two months' APR. This would still work out less than paying interest on all of the remaining payments, providing you're not near the end of your loan term.
Try our free Credit Club
Sign up to MSE's Credit Club to boost your credit power – access our free tools to see how the financial world views you, including:
- An Eligibility Rating that combines your credit score, affordability, and market trends.
- View your full credit report – your financial CV.
- Get personalised acceptance odds for credit cards and loans.
Where can I get a loan?
If you're looking for a loan for a car, check out the best-buy rates below, though remember, the advertised rate isn't necessarily the one you'll be offered. Up to 49% of people accepted for the loan could be given a different – usually higher – interest rate.
Lenders will base your rate and whether they want to lend to you at all on a number of factors, including your credit history and income. Having a higher credit score can mean you're more likely to be offered a lower rate. For most of the providers listed below, you can also apply online directly.
We list loans by 'bands' as the rate you get differs depending on how much you want to borrow.
As we warn above, while you should only borrow what you NEED, a peculiar quirk means you can sometimes pay less by getting a slightly bigger loan amount. Rates of loans under £3,000 are the most expensive, so always check if it's actually cheaper to borrow slightly more.
Important. For loans up to £3,000 you could be much better off using a money transfer credit card if you can repay the full balance over 12 months.
Cheapest loans £1,000 - £1,999
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| Zopa via John Lewis Finance | 9.9% rep APR (1-7 years) | Check eligibility |
| Apply | ||
| Santander | 13.5% rep APR + £20 Amazon voucher | Check eligibility (i) |
| M&S Bank | 14.9% rep APR (1-7 years) | Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. See all official APR examples.
Cheapest loans £2,000 - £2,999
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| Zopa via John Lewis Finance | 9.9% rep APR (1-7 years) | Check eligibility |
| Apply | ||
| Santander | 13.5% rep APR + £20 Amazon voucher | Check eligibility (i) |
| Novuna Personal Finance | £2,500-£2,999: 14.4% (2-5 years) | Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £3,000 - £4,999
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| Novuna Personal Finance | £3,000-£3,999: 9.9% rep APR (2-5 years) £4,000-£4,999: 9.7% rep APR (2-5 years) |
Check eligibility (i) |
| M&S Bank | 9.9% rep APR (1-7 years) | Check eligibility (i) |
| Santander | 9.9% rep APR + £20 Amazon voucher | Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £5,000 - £7,499
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| Santander | 7.1% rep APR + £20 Amazon voucher |
Check eligibility (i) |
| Tesco Bank (ii) | 7.1% rep APR Must have a Clubcard |
Check eligibility (i) |
| M&S Bank | 7.2% rep APR (1-7 years) |
Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. (ii) Tesco Bank loans products are now run by Barclays, see more info here. | See all official APR examples.
Cheapest loans £7,500 - £15,000
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| TSB | 5.9% rep APR | Check eligibility (i) |
| Santander | 6% rep APR + £20 Amazon voucher | Check eligibility (i) |
| M&S Bank | 6% rep APR (1-7 years) |
Check eligibility (ii) |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £15,001 - £20,000
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| TSB | 5.9% rep APR | Check eligibility (i) |
| Santander | 6% rep APR + £20 Amazon voucher | Check eligibility (i) |
| M&S Bank | 6% rep APR (1-7 years) |
Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. | See all official APR examples.
Cheapest loans £20,001 - £25,000
| LENDER | RATE (1-5 years or stated) |
CHECK ELIGIBILITY + APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| TSB | 5.9% rep APR | Check eligibility (i) |
| Santander | 6% rep APR + £20 Amazon voucher | Check eligibility (i) |
| Tesco Bank (ii) | 6% rep APR Must have a Clubcard |
Check eligibility (i) |
(i) This provider has asked us to link only to our eligibility calculator. (ii) Tesco Bank loans products are now run by Barclays, see more info here. | See all official APR examples.
Important. Certain lenders offer personal loans up to £50,000, though it's a huge commitment, so think very carefully before getting such a large amount. Be VERY sure you can repay it.
If you do plan to borrow, first check with your own bank, as cheap rates for such large borrowing are often for existing current account customers only. If your bank can't help, next look at the cheapest open market rates.
1. You need to be an existing customer to qualify for these loans
| LENDER | RATE (1-5 years or stated) |
APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| First Direct |
£25k-£30k: 5.9% rep APR (1-8 years) | Apply (not in our eligibility calc) |
| £30k-£50k: 6.9% rep APR (1-8 years) | ||
| Nationwide | £25k-£35k: 6.9% rep APR | Apply (not in our eligibility calc) |
| £35k-£50k: 7.9% rep APR | ||
| Bank of Scotland/ Halifax/ Lloyds | £25k-£35k: 7.8% rep APR | Apply to Bank of Scotland, Halifax or Lloyds (not in our eligibility calc) |
| £35k-£50k: 8.8% rep APR | ||
| Barclays | £25k-£35k: 7.9% rep APR | Apply (not in our eligibility calc) |
| £35k-£50k: 8% rep APR | ||
| NatWest/RBS/Ulster Bank | £25k-£35k: 7.9% rep APR (1-8 years) | Apply to NatWest, RBS or Ulster Bank (not in our eligibility calc) |
| £35k-£50k: 8.9% rep APR (1-8 years) | ||
See all official APR examples.
2. The top open market loan over £25,000
| LENDER | RATE (1-5 years or stated) |
APPLY |
|---|---|---|
| Representative rate. At least 51% of those accepted must get this rate, others can be charged more. | ||
| Tesco Bank (i) | £25k-£35k: 7.8% rep APR (1-7 years) Must have a Clubcard. |
Check eligibility (ii) |
See all official APR examples. (i) Tesco Bank loans products are now run by Barclays, see more info here. (ii) This provider has asked us to link only to our eligibility calculator.
If the above doesn't work, you could combine smaller personal loans or remortgage, though that usually means extending the term, more interest and securing the debt on your home.
Alternative types of car finance to consider
Broadly speaking, there are six different ways to pay for a car. The table has the key differences at a glance, before we run through the alternatives to a loan in more detail.
Comparing ways to finance a car purchase
| Finance type | Typical length of agreement? | Initial deposit required? | Who owns the car? | Mileage restrictions? |
| None – cash savings | N/A | N/A | You | No |
| 0% credit card | Up to 23 months | No | You (though you'll still need to repay the debt) | No |
| Personal loan | Usually 1 to 7 years | No | You (though you'll still need to repay the debt) | No |
| Personal Contract Purchase | Usually 1 to 5 years | Yes (i) | The finance company, unless an optional final balloon payment is made | Yes (ii) |
| Hire Purchase | Usually 1 to 5 years | Yes (i) | The finance company, until the final repayment is made, then you | No |
| Leasing/Personal Contract Hire | Usually 1 to 4 years | Yes (i) | The finance company, at all times | Yes (ii) |
(i) In most circumstances, though sometimes you can get a deposit contribution from the dealer or structure a lease deal to pay nothing upfront. (ii) You'll usually agree an annual mileage limit with the finance company at the start of the deal & will pay additional fees if you are over this when handing back the car.
Which is the best option for you?
Sadly, there's no simple answer, as it depends on whether you want to own the car and many other factors. However, we've included more information on each alternative to a car loan below, to help work out which is right for you.
What are the pros and cons of borrowing money for a car?
Getting a personal loan for a car comes with both advantages and disadvantages. It's important to think about your financial situation, goals and priorities before deciding to take on debt. Here are some pros and cons to think about:
The pros of personal car loans
- You own the car immediately. Taking out a personal car loan means you can pay for the vehicle outright and become the owner straightaway, even though you're spreading the cost over a period of time. As the owner you'd be able to drive and modify the car as you like, which wouldn't be the case with some other forms of car finance, which may involve a mileage limit, for example.
- Flexibility and cost management. Personal car loans typically come with various repayment terms, allowing you to choose one that suits your needs and your budget. For example, you can choose to spread the cost out over a long term with lower monthly repayments, though this would cost you more overall as you'll pay more interest.
- Potentially access a wider range of vehicles, support and options. Financing could allow you to consider a newer – and potentially more reliable – vehicle. You may get the benefit of a warranty and after-sales support if you buy from a dealer, and could customise the car to meet your own spec if you buy brand-new, though always factor in depreciation if doing this.
- Boost your credit score. Making timely payments on a car loan can positively affect your credit score by demonstrating your ability to manage credit responsibly. This will increase your chances of getting finance in the future.
The cons of personal car loans
- You could pay significant interest. Borrowing money comes with interest payments, which increase the total cost of the car. Bear in mind that the longer the loan term, the more you will pay in interest.
- It's a BIG commitment. Taking on a personal loan to buy a car is a financial commitment that ties up a portion of your income for an extended period. Unexpected life events or financial difficulties can make it challenging to meet monthly payments, so ensure you budget carefully.
- You need a good credit score. Without a good one, you may not get a decent interest rate and could be rejected for a personal car loan altogether. That said, this is a risk when applying for other types of finance too. See our Credit scores guide for full information on how to check yours for free, including tips to boost it.
- The possibility of repossession. If you fail to make payments, the lender may repossess the car. This is not only stressful in itself, but can have serious consequences for your credit score and financial stability.
- Can damage your credit score if you miss payments. Missing a loan payment can lead to a fine, and the lender is likely to report it to credit reference agencies. This will go on your credit report and will impact your ability to get credit in future.
- It could be more difficult to upgrade. If you prefer to get a new car every few years, personal contract purchase might be a more appropriate form of car finance.
Before getting a personal loan to buy a car, carefully assess your financial situation, consider the alternatives, and weigh the long-term impact on your budget and financial goals. It's crucial to compare loan terms and interest rates and to fully understand the terms and conditions of any prospective loan agreements.
Can I be rejected for a personal car loan?
Yes, you can be rejected for a personal car loan. That's because a personal car loan really is just a regular unsecured personal loan, so the same rules and procedures apply.
You'll be credit-checked, and if the lender deems you uncreditworthy – in other words, it thinks you're at higher risk of defaulting on the payments – it'll reject you.
A lender will primarily consider your credit rating and credit history to evaluate your 'creditworthiness'. A bad credit score, a backdrop of late payments or a high level of existing debt may result in a loan rejection, as could not earning enough to cover the costs or your employment history being unstable.
Other reasons you might be rejected for a personal car loan, aside from having bad credit, include providing incomplete or inaccurate information on your loan application, trying to borrow too much money and not meeting the lender's specific criteria.
Personal loan vs car finance: Which should I choose?
Whether a personal car loan or more traditional car finance is right for you depends on various factors, including your preferences, financial situation and long-term goals. Below is an overview for each option:
Personal car loan
With a personal car loan, you own the car outright from the beginning. Plus, you have the flexibility to compare lenders to find the best interest rate that you can access. And there'll be no mileage restrictions either, unlike with leasing, allowing you to drive as much as you want without additional costs.
That said, monthly payments can be higher compared with some car leasing options, while you also bear the full brunt of the car's depreciation since you own it from the start.
Car finance
More traditional car finance encompasses car leasing, Hire Purchase and Personal Contract Purchase. These generally involve lower monthly payments than personal car loans, as well as a smaller down-payment. Because of this, you may be able to afford a swankier car than you would if you bought one outright.
However, not only are the overall costs likely to be higher, but, depending on the type of car finance you opt for, you might not own the car until the final payment is made. In addition, buying a car on finance typically involves mileage restrictions and additional charges if you were to exceed them.
So which is better?
There is no one-size-fits-all answer – the 'better' option depends on your individual preferences and financial situation. If owning the car outright is essential to you and you plan to keep it for a long time, a personal car loan is likely preferable. On the other hand, if you prefer lower monthly payments and the option to drive a newer car more frequently, car financing could be a better fit.
What other costs should you consider when buying a car?
Of course, loan repayments aren't the only costs involved in buying and using a car. From fuel or electricity costs to car insurance, there's lots to consider when working out how much a car will cost you overall.
Here are the main expenditures to take into account:
- Fuel. You won't get far without fuel – quite literally. According to consumer research site NimbleFins, the average driver spends £1,225 a year to fuel a petrol car and £1,572 to fuel a diesel. What you'll end up spending in reality depends on factors such as how much you drive, how fast you do so and even where you fill up your tank. If your car's fully or part-electric, you'll have to consider the cost of charging it, although there are specific electric vehicle tariffs out there which can sometimes be cheaper.
- Insurance. As a minimum you need third-party motor insurance to drive legally in the UK, though many will want a higher level of cover to protect in case of damage to their own vehicle. The average car insurance premium is £900 a year – so use our Compare+ Car Insurance tool to apply online and find the cheapest policy for you. Some may also want the peace of mind of breakdown cover, which comes as a separate cost, or often can be accessed through a packaged bank account, which can provide value for money for some.
- MOT and servicing. Passing the Ministry of Transport test – commonly known as an MOT – is a legal requirement for all cars more than two years old. MOT tests are capped at £54.85 for cars, however, it's possible to get them much cheaper. Any repair costs will be over and above the initial MOT fee. Plus, servicing is a further additional cost, but doing this regularly can ensure the health and longevity of your vehicle.
- Maintenance. Speaking of servicing, it's unlikely that your car will only require repairs on MOT day. Of course, how much you spend on maintenance throughout the year depends on the number of issues that crop up, and the nature and severity of them. Some minor repairs may be covered by your breakdown cover (if you have it). Plus, you'll also need to replace consumable parts such as tyres, batteries and wiper blades, for example.
- Road tax. You must pay road tax – also called car or vehicle tax – to use public roads. Its cost depends firstly on the age of your car, and then on factors such as engine size, fuel type and CO2 emissions, although some vehicles don't require tax at all. You'll also need to pay a different rate for a year if you're registering a new car for the first time. Learn more about road tax at Gov.uk.
Other costs you'll need to think about when buying a car include parking, tolls and other road charges such as the congestion charge.
Not the car finance option you were looking for? Check these out...
Personal Contract Purchase | Hire Purchase | Car leasing | Also see: Compare loans
Also read our Motoring MoneySaving guide for ways to reduce driving spend while staying safe and legal on the road.
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