Written by 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).
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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? | Secured Yes | Unsecured No |
| Maximum loan amount? | Secured Up to $100,000 | Unsecured Up to $75,000 |
| Maximum loan term? | Secured Seven years | Unsecured Seven years |
| Repayment schedule? | Secured Weekly, fortnightly or monthly | Unsecured Weekly, fortnightly or monthly |
| Interest rates and fees? | Secured Lower | Unsecured Higher |
| Availability? | Secured Fewer options | Unsecured More options |
| Speed of approval? | Secured Fast | Unsecured Faster |
| Loan usage? | Secured Flexible | Unsecured 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
The 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.
How to compare secured personal loans
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.
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.
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.
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.
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.
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
Personal loan eligibility and documentation
Frequently asked secured personal loan questions
Yes – if you can’t afford to take on a loan by yourself or are sharing the funds for a combined purpose, you can apply for a personal loan jointly with your partner. The asset you use can belong to one or both of you. Adding a co-borrower to your loan can be an effective way of maximising your borrowing power and lowering your interest rate, as two income streams are considered safer than one by lenders.
By adding an asset as collateral, lenders are likely to feel more confident in their ability to receive their payment in full by the end of the loan agreement compared to an unsecured finance deal, which comes with fewer safety nets.
However, this doesn’t mean approval is guaranteed. Your approval is still subject to a range of checks, such as whether you can afford your loan and what the current state of your credit file is.
Yes – there are plenty of banks that offer secured personal loans. However, it’s important to compare your options before deciding on which deal is right for you. Savvy is partnered with lenders you can trust from around the country, giving you confidence that your comparison process will be a high-quality one.
In most cases, these loans come with fixed interest. This means it’s locked in from the start of your loan, protecting you from rate increases and facilitating more accurate budgeting for the future. You may also be able to access variable interest, though, which is left open to fluctuation and can lead to savings if rates fall during your term.
Secured loans may be harder to get if the asset you want to use is old and not in great condition. However, having an eligible asset can make getting approved easier in other cases.
It may be possible to get a secured personal loan if you have bad credit, provided you’re able to meet all your lender’s qualification criteria. We’re partnered with lenders who can help borrowers with bad credit access the personal loan funds they need, so enquire with us today to get started!
