Compare Secured Personal Loans - Australia

Secured personal loans can be attractive because they generally have lower interest rates and may enable you to borrow more, when compared with many unsecured loan options. But when you start seeing terms like ‘assets and security’, it can be hard to figure out the ins and outs of these loans. To effectively compare secured personal loans, and therefore pick a suitable option, you could be better off understanding some of the financial terminology that gets bandied about.

That’s why we put this guide together. These simple explanations could help you compare secured personal loans against a range of different options, so you can decide if a secured personal loan could help you to achieve your goals.

A secured personal loan is a type of loan that requires collateral and can enable you to buy products and services using credit (money you don’t actually have). With a secured personal loan you borrow money that is secured against an asset that you own. The asset you use as collateral can be repossessed by the lender if you are unable to repay the loan.

In many cases, secured personal loans can have a lower interest rate compared to an equivalent unsecured personal loan because the lender has security, in the form of your asset. If you are unable to repay your secured personal loan, the lender may repossess your asset to recover their losses.

While many items and assets can be used as security for a personal loan, the most recognisable secured loans are generally car loans and home loans. For example, with a car loan the lender uses your car as collateral, and if you fail to repay the loan they can repossess and sell your car to recover their losses.

With a secured personal loan it's important to remember that if you default on the loan, the lender can repossess your asset and sell it to help recover any of their losses. As with any credit, make sure you can afford the repayments before taking out a secured personal loan.

There are generally two types of personal loans available in Australia — secured personal loans and unsecured personal loans. The main difference between these two types of personal loans is the use of an asset as collateral to secure the loan. An asset such as a car, or other valuable property, can be used to secure the loan, while an unsecured personal loan does not require an asset to be nominated as collateral.

Another difference between a secured and unsecured loan is that, after applying for a secured loan, the lender may require you to get, and continue to hold, insurance for the nominated asset. That way, if something happens to it, they can regain their money through an insurance payout if needed. On the other hand, if you take out an unsecured loan to buy a product, the lender is unlikely to care whether you have insurance or not.

When a lender offers an unsecured loan, they may do so with a higher interest rate than a secured personal loan, because it can be harder for the lender to recover their funds if you default on the loan. While an unsecured loan does not carry the risk of losing a secured asset, if you do not repay your loan there is still action the lender can take to help recover the debt.

Before deciding between a secured and unsecured personal loan, make sure you’ve got a good understanding of your financial situation and your ability to repay the loan. Choosing the right type of personal loan is an essential step to help avoid unnecessary financial stress.

Secured personal loans work much like any other kind of loan. You have to meet the lender’s eligibility criteria and fill in an application. The lender will then review your personal and financial situation (such as your income, credit history, and financial responsibilities, like credit cards) to determine whether you meet its lending criteria (essentially, whether the lender thinks you’ll be able to repay the loan).

If the lender decides to approve your personal loan, they’ll send you a loan offer with all the terms and conditions of your loan, including information about when you have to make payments to repay the loan (repayments) and how much they’ll be. You can then sign the contract and will usually receive your money pretty quickly — sometimes within 24 hours.

One key difference with a secured loan is that you’ll also have to provide details of the security when you fill in your application. The lender will do some research and calculations to help figure out how much the asset is worth and what it is likely to be worth throughout the life of your loan. Only if it’s satisfied with the asset will it accept an item as collateral for the loan.

Now, many people wonder what happens to the asset while the loan is active. As long as you make your repayments on time, the asset you’ve used to guarantee your loan will remain yours. Once you’ve repaid and closed the loan, your asset will be safe and your lender won’t be able to take it off you.

If, however, you miss a compulsory loan repayment (also called defaulting on your loan), your lender may have the right to take possession of the asset (repossess it). However, it’s very unlikely lenders will do that immediately. If you’re a few days or even weeks late, most lenders will start by charging you a late fee and sending you a default notice. If you still don’t make your repayment, or miss a number of repayments, then the lender might repossess your asset. Having said that, your loan terms and conditions will spell out how long your lender will wait before claiming your asset.

If you’re having trouble making your repayments or struggling financially, it’s important that you contact your lender’s hardship or financial difficulties team straight away. They may be able to help you organise a payment plan to help you catch up on your repayments. There are also financial counselling services available that may be able to help.

You might consider applying for a secured personal loan in Australia for any of these reasons:

• Lower interest rates. Secured personal loans are often offered with lower interest rates, compared with an equivalent unsecured personal loan, because the lender has security in the form of an asset. This lower interest rate can result in lower monthly repayments, and save you money in the long run.
• Easier path to approval. Because there is security, lenders may be more willing to approve your loan application, even if you have a lower credit score or imperfect application. This may also be useful for people who are self-employed.
• Larger loan amounts. In some cases, you may be able to borrow a larger amount of money with a secured personal loan than you would with an unsecured loan.
• Longer repayment terms. Some secured personal loans may offer longer repayment terms than unsecured loans.
• Consolidate debts. If you have multiple debts with high interest rates, a secured personal loan may be an option to consolidate them into one monthly payment. This can make it easier to manage your debts and save money on interest, if you’re able to find a suitable loan.
• Improve your credit score. If you make your repayments on time and don’t borrow beyond your means, a secured personal loan may help improve your credit score. This is because making regular payments demonstrates to lenders that you are a responsible borrower.

The amount you can borrow with a secured personal loan will depend on a range of factors, including your credit score, income, expenses, and the value of the asset you're using as security.

In Australia, you will typically find lenders offering secured personal loans ranging from around $2000 to up to $100,000, although some lenders may offer higher amounts. The loan term can also vary, usually ranging from one to 10 years.

To apply for a secured personal loan, you'll be required to provide proof that you own the asset you're using as security, as well as documentation to verify your income and expenses. Lenders will also conduct a credit check to assess your creditworthiness, and determine whether you're eligible for a loan.

Don’t forget that any fees and charges, such as an establishment or application fee, will usually be added to the loan principal. This can also be the case for ongoing fees, such as an annual fee, which may be charged by some lenders.

When it comes to securing a personal loan, it’s important to understand the interest charges that you may face. To help you calculate interest charges on a secured personal loan, we've put together a guide that covers what you need to know.

First, it's important to compare secured personal loan rates to ensure that you find a deal that works for you. To do this, you can research lenders and compare their interest rates, loan terms, fees, and repayment options – why not start with the comparison table at the top of this page? Keep in mind that the interest rate you're offered may depend on a range of factors, including your credit score, employment status, income, and the value of the asset you're using as collateral.

Once you've found a lender that you're happy with, you can calculate an estimate of the interest charges on your secured personal loan. To do this, you'll need to know the loan amount, the interest rate, and the loan term. The loan term refers to the length of time over which you'll be repaying the loan, and it can range from a few months to several years.

The simplest way to calculate an estimate of the interest charges and repayments is to use a personal loan calculator, like the one found at MoneySmart.

It's important to note that some lenders may charge additional fees, such as application fees, annual fees, or early repayment fees. Make sure you understand all the costs associated with your loan before signing on the dotted line.

Once you’ve decided a secured personal loan is the right kind of loan for you, it’s time to compare a range of options. Unfortunately, there’s no single best secured personal loan. Why? Because, what might be an advantage of a specific secured loan for one person, might be a disadvantage for someone else because their goals and challenges are different.

So, one way to pick a suitable secured personal loan is to compare a range of options in the context of what you need and what you want to achieve. Our main personal loan comparison page includes a detailed guide to comparing personal loans. You can add these questions into the mix to help with your secured loan comparison:

• Does your income fluctuate? Some products may allow you to make additional repayments without a penalty when your income is high, and to redraw some of that money (with a redraw facility) if challenging expenses arise. If your income is particularly variable, you might value these kinds of features more highly.
• Do you prefer repayment certainty? If so, you might prefer a fixed interest rate because then you’ll always know what your repayments will be.
• Do you anticipate an ability to increase your repayments during the life of your loan? If so, you may be able to reduce the overall cost of the loan by making extra repayments or by paying the loan off early. If you apply for a variable-rate secured loan, that’s not likely to cause any issues. However, fixed-rate loans can be a different story. They often charge early repayment fees, which could make such a loan more expensive and less desirable in that situation.
• How does the comparison rate compare to the interest rate? Personal loans often have additional fees and charges, but some secured loans may have more added fees than others. And where you have high fees, you have an opportunity for lenders to differentiate their products from those of their competitors. As a result, there can be quite a big difference between the comparison rates of various loan options. But looking at the difference between the comparison rate and interest rate can give you a good idea of how significant the impact of the fees is on the overall cost of the loan. You’ll still need to carefully review the fee amounts and terms of those fees, as comparison rates don’t include all fees, and not all the fees may be relevant to your situation. But it’s a good place to start.

Some of the ways you can use a secured personal loan in Australia can include:

• Home improvements. If you're looking to make home improvements, such as a new roof or kitchen renovation, a secured personal loan can provide you with financing to help get the job done. You may be able to use a loan to pay for materials, labour, or any other related expenses.
• Car repairs. If your car needs repairs, a secured personal loan may be an option to help you fund them. This type of loan could be an alternative option to using your credit card or another option, like buy now, pay later.
• Debt consolidation. If you have multiple debts with high interest rates, such as credit card debt or personal loans, a secured personal loan may be an option to help you consolidate them into one payment. By doing so, you may be able to reduce your interest rate and save money on interest charges.
• Business financing. Want to start or expand a business? A secured personal loan might be an option to help with funds to get started. You may be able to use a secured personal loan to pay for equipment, inventory, or any other business-related expenses.
• Medical expenses. If you have medical expenses that your health insurance doesn't cover, a secured personal loan may be an option to help finance the costs of medical bills, prescription medications, or other related expenses.
• Large purchases. If you're looking to make a large purchase, such as a boat or caravan, a secured personal loan may be able to help you finance it. You can use the loan to pay for the purchase, and the asset you’re buying could be used as the security for the loan.

The amount of time it takes to get a secured personal loan can vary depending on a number of factors. This can include the lender you choose to apply with as different lenders have different application processes, which can affect the time it takes to get approved for a loan.

Some lenders may offer a pre-approval process, which can give borrowers an idea of how much they can borrow, and what the terms of the loan will be. This can be a good way to speed up the process of getting a loan, because borrowers can provide much of the required information upfront and be more confident in their ability to secure a loan.

Another factor that can affect the time it takes to get a secured personal loan is your credit score. Lenders will typically look at your credit history to determine your creditworthiness. This can include factors such as your payment history, outstanding debts, and any previous bankruptcies or defaults. If you have a good credit score, you may be able to secure a loan more quickly than someone with a poor credit score, because you would be considered less of a risk.

In addition to credit score, lenders will also consider your income and employment status, which can also take some time to confirm. Borrowers who are employed full-time and have a steady income may be more likely to get approved quickly for a loan than those who are self-employed or have an irregular income.

Lenders will usually ask for proof of income, such as payslips or bank statements, along with identity verification, and details of the asset being used as security. This can add time to the loan application process if you’re not prepared with the necessary documentation.

If you have a secured personal loan and you're looking to reduce your monthly payments or take advantage of lower interest rates, refinancing may be an option worth exploring. Refinancing a secured personal loan can help you save money in the long run, but it's important to understand the process and the potential benefits and drawbacks.

Refinancing a secured personal loan involves taking out a new loan to pay off the original loan, often with the goal to secure better terms or interest rates. Here are some things to consider before you refinance your secured personal loan:

• Check your credit score. Your credit score plays a significant role in the interest rate you'll receive for a refinanced loan. Before applying to refinance, check your credit score and address any issues that may be negatively impacting it. A good credit score will help give you a better chance of negotiating a good rate on a new loan.
• Consider the fees and charges. Refinancing a loan may come with fees and charges, such as an application fee with the new lender or break fee for the previous lender. These fees can add up and affect the overall cost of the loan, and may end up costing you more than the savings from the new interest rate. Be sure to read the terms and conditions and compare the costs of refinancing with the potential savings.
• Shop around for a great rate. When considering a refinancing option, it's important to shop around and compare the rates and terms offered by different lenders. Don't settle for the first offer you see, as you may be able to negotiate a better deal.
• Understand the risks. Refinancing a secured personal loan can be a good way to save money, but it also comes with some risks. If you choose to extend the loan term, you may have lower repayments, but end up paying more interest in the long run.

The short answer is yes, a secured personal loan could impact your credit score. However, whether the impact is positive or negative will depend on how you manage the loan.

Any time you take out a loan or line of credit, it will be reflected in your credit report. If you make all of your payments on time and in full, a secured personal loan can actually have a positive impact on your credit score. Making timely payments shows that you are a responsible borrower, which can help to improve your credit score over time.

However, if you are unable to make your payments on time, or if you default on the loan, your credit score can be negatively impacted. A drop in your credit score can make it more difficult to be approved for credit in the future, or may mean your charged a higher interest rate on future loans.
It's also worth noting that applying for a secured personal loan can temporarily lower your credit score. This is because, each time you apply for credit, it’s recorded in your credit report as a hard inquiry. Too many hard inquiries can be a red flag to potential lenders.

If you're considering a secured personal loan, it's important to do your research and compare lenders to get a great deal – you can start with the comparison table on this page. Look for lenders who offer competitive interest rates and favourable terms based on what’s best for your needs. And, as always, make sure you read and get a good understanding of the terms and conditions of the loan before signing on the dotted line.

When looking to apply for a secured personal loan you’ll usually come across the following steps:

• Compare lenders. Research and compare lenders to find one that offers a secured personal loan that suits your needs – you can start by comparing a range of lenders using the comparison table at the top of this page. Be sure to check important details such as interest rates, comparison rates, fees, loan terms, and customer reviews.
• Gather documents. You'll need to provide documentation such as proof of income, identification, and details of the collateral you're using to secure the loan.
• Apply for the loan. Fill out the lender's application form and provide the required documentation. The lender will then assess your application and let you know if you've been approved.
• Receive the funds. If you meet all of the lenders eligibility criteria and your application is approved, the lender will transfer the loan funds to your account.
• Repay the loan. Make regular loan repayments according to the loan terms. Failure to repay the loan could result in penalties, repossession of your asset or a negative affect on your credit score, so it’s important to keep up and to contact your lender if you’re having trouble making your repayments.

It’s important to remember that the application process for a secured personal loan can vary depending on the lender you choose and your own circumstances.

We can’t tell you exactly how to choose a loan, and you probably wouldn’t want us to anyway. Instead, we’ve given you info to help you better understand how secured personal loans actually work. And then we’ve laid out simple questions to ask which could help you compare a range of options, so you’ll have tools to help pick a secured personal loan, or any other kind of credit, that’s suitable for your needs.