A secured personal loan uses an asset as collateral to secure the loan. The most common asset used for these loans is your car, but there are other options available (which you can read about in the next section).
In terms of how they work, they’re the same as any other standard personal loan: you receive a lump sum that can be used for a range of purposes and repay it, alongside interest and fees, over a set term of between one and seven years.
Because of the added security in the form of your collateral, secured personal loans tend to come with lower interest rates and fees, as well as potentially increased borrowing power (though this will depend on what you can afford and the value of your security).
Why apply for a personal loan with Savvy?
What assets can I use to secure a personal loan?
As mentioned, using your car is the most common way to take out a secured personal. However, some of the other assets that certain lenders may decide are suitable collateral include:
- Artwork
- Boats and other leisure craft
- Jewellery
- Motorcycles
- Property
- Savings
It’s important to note that all assets must meet your lender’s requirements for loan security. These usually relate to the age and condition of the asset. For example, if you want to use your car as security for your loan but it’s over 15 years old, many lenders won’t accept it as collateral because of the risk of issues during your term and the potential difficulty selling it.
When you apply with Savvy, you can speak with a member of our team about what your options are for supplying personal loan security.
How much will my personal loan cost?
The variables that will impact the cost of your loan include:
- Interest rate: the higher your rate, the more you’ll pay.
- Fees: the same applies to fees.
- Loan term: longer loan terms will lead to greater overall costs.
- Loan amount: because interest is calculated based on your loan balance, larger loan sums will lead to more interest paid.
- Early repayments: making additional repayments will reduce the cost of your loan (provided you aren’t charged fees to do so).
- Credit score and overall profile: your rate will be determined based on how confident your lender is in your ability to repay the loan, so higher credit scores and more available income can help your rate.
How are secured loans different from unsecured loans?
In contrast to secured loans, unsecured loans require no form of collateral. This makes them more accessible to a wider range of borrowers who may not have an asset eligible to be used as collateral.
Additionally, more lenders offer them than secured personal loans, potentially giving you more options to compare. They can also be processed more quickly because there’s no need to assess any assets.
However, due to the lack of security, unsecured loans tend to have higher interest rates and fees than secured loans, as well as lower maximum borrowing ranges. We’ve broken down the key differences in the following table:
| Secured | Unsecured | |
|---|---|---|
| Asset collateral? | Yes | No |
| Maximum loan amount? | Up to $100,000 | Up to $75,000 |
| Maximum loan term? | Seven years | Seven years |
| Repayment schedule? | Weekly, fortnightly or monthly | Weekly, fortnightly or monthly |
| Interest rates and fees? | Lower | Higher |
| Availability? | Fewer options | More options |
| Speed of approval? | Fast | Faster |
| Loan usage? | Flexible | Flexible |
How much can I borrow with a secured personal loan?
Your lender will work out your borrowing power based on several factors specific to your profile, including:
- Your income and income stability
- Your employment and employment stability
- Your expenses
- The value of your loan security
- Your credit score
- Your history repaying similar debts
- Your dependants
If you’re unsure how much you’re able to borrow, you can get a personal loan pre-approval through Savvy, which will provide an indicative interest rate and loan amount based on your profile before you formally apply. Alternatively, you can use Savvy’s personal loan borrowing power calculator to provide an estimation.
The pros and cons of secured personal loans
Pros
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Lower rates and fees
Because of the added layer of security, this type of loan comes with lower interest rates and fees than unsecured loans.
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Higher loan amounts
Additionally, the value of your asset could allow you to borrow more than you otherwise would be able to without any security.
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Flexible usage
Just like a regular personal loan, secured loans can be used for a wide variety of purposes, from consolidating debt to funding your next holiday.
Cons
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Not all assets accepted
To qualify as collateral, your car or other asset must meet your lender’s age and condition requirements.
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Longer processing time
Because of the need to assess whether your collateral is suitable for the loan, it may take longer to be processed and approved.
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Fewer options available
You may simply find that the number of secured options available is outweighed by the number of unsecured loans.
Types of personal loans
Personal loan repayment calculator
It’s important to have an idea of what different loans might cost you overall before you apply. Fortunately, Savvy’s personal loan repayment calculator is simple to use and tells you everything you need to know about how much different offers might add up to overall based on a variety of different factors.
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
How to compare secured personal loans
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Interest rates
Getting the right interest rate on your loan could result in significant savings, as you can see in one of the tables above. For example, on a $35,000 personal loan repaid monthly over five years at 9.00% p.a., you’d pay almost $8,600 in interest alone. However, by locking in a rate of 7.50% p.a. instead, you can save more than $1,500 throughout your repayments.
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Fees
The same applies to fees, with application ($0 up to $600) and monthly ongoing charges ($0 to $10) potentially setting you back a significant amount across your term, with early repayment fees potentially being charged as well. The simplest way to compare both is to look at comparison rates, which incorporate interest and fees into one figure.
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Available loan amounts
Of course, the lender you choose will need to offer the loan size you’re after. For example, some won’t allow borrowers to access amounts as great as $100,000, while others may set a minimum as high as $15,000 for secured finance. If you find yourself in either position, you should compare your lending options carefully.
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Potential loan terms
You’ll also need to make sure you can repay your loan at a pace that suits you. Not all lenders will offer the full range of one to seven years, so you should try to make sure wherever possible that your preferred term is offered. When you apply with us, we’ll only consider lenders who can offer the term you’re looking for.
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Repayment flexibility
Having the ability to repay your loan ahead of schedule without any penalties can help you save a significant amount overall. Most lenders will allow you to make free additional payments throughout your loan term, but this may not be the case for all of them.
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Security requirements
Not all assets will meet your lender’s security requirements, either. Check the list of assets that are accepted as personal loan security, as well as what their age and condition criteria are. For instance, some lenders will require your car to be no older than ten to 12 years at the end of your loan term, while others may extend this to 15 or more.
Apply for your personal loan online
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Complete our simple online application form
First and foremost, you’ll need to fill out our quick and easy online form. Tell us about yourself, your finances, the loan you’re after and why you need it in just a few minutes.
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Compare your options with Savvy
Once you’ve done this, you’ll be able to assess the products on offer from our partnered lenders. A member of our team will reach out to help you choose the best available offer.
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Send your documents and formally apply
If you’re happy with one of the options available, you can go ahead and formally apply. We’ll handle this for you; simply send the required documents through our online portal and we’ll do the rest.
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Get approved and sign your contract
We’ll let you know when you’re formally approved, which can happen in a matter of hours, and all you’ll need to do is sign your loan contract electronically to receive your funds as soon as the same day.
Personal loan eligibility and documentation
Eligibility
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Age
You must be at least 18 years of age
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Residency
You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder)
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Income
You must be earning a stable income that meets your lender’s minimum threshold (this can start from as little as $20,000 per year)
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Employment
You must be employed on a permanent, casual or self-employed basis
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Credit score
You must meet your lender’s minimum requirements related to your credit score and not be bankrupt or under a Part IX debt agreement
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Contact
You must have an active phone number, email address and online bank account in your name
Documents
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Personal information
Your full name, date of birth, address and contact details
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Photo ID
Such as a driver's licence or passport
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Payslips
Your last two consecutive payslips (or your last tax return if you're self-employed)
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Assets and liabilities
Information about any assets you own (such as a car or house) and liabilities in your name (such as other loans)
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Bank statements
90 days of bank statements may be requested, but not always
