Compare Secured Personal Loans

What is a secured personal loan?

A secured personal loan is a type of credit where you offer an asset, like your house or car, as a guarantee to the lender. If you can’t repay the loan, the lender can sell the asset to recover the cost of the loan.

For example, if your car is the asset backing the loan, if you fail to make repayments, the car can be repossessed and sold by the lender.

This security gives the lender more confidence and can help you secure better terms, like competitive interest rates and larger loan amounts.

What assets can secure a personal loan?

Only some items can be used as collateral for your personal loan. Different lenders have their criteria, but the types of assets they usually accept include:

• Property: The amount you can borrow will depend on the amount of equity in the property.
• Cars: Because they are relatively easy to repossess, cars are one of the most common assets used to secure a loan.
• Other valuable items: Jewellery, art, or other high-value collectables may also be accepted by some lenders.

Unsecured vs secured personal loan

The main difference is an unsecured loan doesn’t require an asset (lending is based on creditworthiness), while a secured loan does.

Consequently, secured loans often offer lower interest rates and higher borrowing amounts, while unsecured loans may have higher interest rates but no risk to specific assets.

Which is right for you?

A secured personal loan could be suitable if you need to borrow a large amount or have a lower credit score.

When it comes to high-risk endeavours like starting a new business, choosing unsecured lending is sometimes popular. However, secured loans often prove prudent for ventures with minimal risk due to their potential for significantly lower interest rates.

How much can you borrow?

With a secured loan, you can usually borrow anywhere between $2,000 to $500,000. The exact amount depends on the lender and the value of the asset, but secured loans often allow you to borrow more than unsecured loans.

Pros and cons of a secured personal loan

Pros

You might be able to borrow more: The added security of collateral means lenders can offer higher loan amounts than unsecured loans. This can be helpful if you need to borrow money for major expenses like home renovations or business investments.

Lower interest rates: Because the risk to the lender is lower (they have the asset as backing), this often results in lower interest rates. This can save money on interest payments over the life of the loan.

Accessible for lower credit scores: Secured personal loans can be more accessible if your credit score isn’t great. The collateral gives lenders more confidence which improves your chances of loan approval.

Cons

You could lose the asset: The most significant risk of secured loans is the potential loss of the asset you’ve used as collateral. If you default on your loan repayments, the lender can claim the asset, such as your car or home, to recover their money. This highlights the importance of being realistic about your ability to meet the repayment obligations before securing a loan.

Ongoing financial implications: Defaulting on a secured loan can have significant financial consequences. Losing an asset like a car or home can seriously impact your finances and daily life.

Limited flexibility: Because the loan is tied to collateral, you can’t sell or dispose of the asset until the loan is repaid in full. This lack of flexibility can be a disadvantage if you need to change your assets or financial plans during the loan term.

You need a valuable asset: Secured loans typically require high-value security, which may limit your options if you can’t put up an asset of significant value.

Personal Property Securities Register (PPSR) Fee

One of the fees unique to a secured personal loan is the PPSR fee.

The Personal Property Securities Register is a national record to register a legal claim to personal property. The borrower usually pays the fee for registering the security (PPSR fee). PPSR fees can range from $30 to $250.

Tips for comparing secured personal loans

When comparing secured personal loans, consider the following:

Asset: What types of assets does the lender accept for security?

Interest rates: A lower rate will save you money in the long term.

Loan amount: Ensure the lender offers the amount you need.

Loan term: Understand how long you have to repay the loan. Longer loan terms result in higher overall interest costs.

Fees: Establishment, PPSR, monthly account, and early repayment fees.