What are secured personal loans?

When you take out a personal loan, there are two main options to choose from – secured loans and unsecured loans. Secured loans require an asset that you own, like your car or home, to guarantee the money you borrow. If you don’t repay your loan, the bank can sell your asset to get its money back. 

Why do people use secured loans?  

Secured personal loans often have lower interest rates and fees than unsecured personal loans. This is because there’s a lower risk to the lender that they will lose money if you can’t repay your loan. Lower rates and fees can mean you’ll enjoy a cheaper personal loan. You may also be able to borrow more money, or enjoy other features and benefits not available on unsecured loans.  


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What are the main features of secured loans?

Secured loans must be secured by an asset you own. Suitable assets can include a car, equity in a property, or savings in a term deposit. Some lenders will also let you secure a loan with art, jewellery or other valuables. Some lenders only accept certain types of security on personal loans, so check before you apply. If you don’t repay the loan, you’ll lose your security, which could mean losing your car, your savings, or even your house.

Secured personal loans share many features with other personal loans, including: 

  • Advertised interest rate: The extra you’ll pay on your loan over time. This may be a fixed rate, which will stay the same over the loan term, or a variable rate, which may rise or fall at the lender’s discretion.
  • Comparison rate: A figure combining the loan’s advertised interest rate and standard fees and charges to estimate a loan’s overall cost.
  • Upfront fee: The fee you pay to set up the loan.
  • Extra repayments: If you can pay extra off your loan on top of your regular repayments, you will save on interest costs.
  • Redraw facility: Lets you pull extra repayments back out of your personal loan if you need the money back. 

How to get a secured personal loan 

To apply for a secured personal loan, you’ll need to provide details of your income and assets. This is so the lender can work out if you can afford to repay the loan. Check what the lender will need so you can get the paperwork ready in advance. 

When you apply for a personal loan, the bank will perform a credit check. If you’ve had money troubles in the past, you may have a bad credit score. It can be hard to get a personal loan with a bad credit history, but offering security on the loan may help your application get approved.  

What are the pros and cons of secured loans? 

Secured personal loans are less risky to lenders than unsecured loans. This may allow you to borrow more money and pay less in interest costs compared to an unsecured loan. You may also enjoy features such as the ability to make extra repayments or a redraw facility. 

However, the amount you can borrow with a secured personal loan may be limited by the value of your security. The more you want to borrow, the more valuable your security may need to be.  

Secured personal loans may be a competitive option for borrowers with less stable finances such as contractors or the self-employed, as they may be more likely to be get approved finance.  Those with poor credit history too have a higher chance of receiving approval for a secured loan because the security reduces the risk to the lender.  

The downside with a secured loan is that if you fail to pay off the loan for any reason, you may lose your security. Losing your home or your car could make it even harder to get out of money trouble in the future.  

Some online-only lenders offer personal loans, often with lower interest rates. You can apply for these loans from your computer or smartphone. However, online-only lenders won't have branches where you can talk to a banker in person. 

Frequently asked questions

Can you refinance a $5000 personal loan?

Many personal loans, much like home loans, can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans – they also get loaned less money. Each lender has its own policies, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, with higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will guarantee the loan, taking on the financial responsibility if the borrower defaults.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent, without worrying about ending up out of pocket if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What is an unsecured bad credit personal loan?

A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset (such as a car or jewellery) as collateral or security. Lenders charge higher interest rates on unsecured loans than secured loans.

Are there low doc personal loans?

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. They have higher interest rates than regular personal loans and are also harder to access.

What is a secured bad credit personal loan?

A bad credit personal loan is ‘secured’ when the borrower offers up an asset (such as a car or jewellery) as collateral or security. The lender can then seize the asset if the borrower fails to repay the loan.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan – however, the process is easier and faster than taking out a mortgage.

Loan sizes usually range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

How can I get a $3000 loan approved?

Personal loans and medium amount loans from responsible lenders don’t have guaranteed approval, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income (Centrelink payments may not count – so you should check with the lender prior to making an application).

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments. If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan offers – consider contacting the lender before applying. >

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to pay extra onto your personal loan or medium amount loan could bring you benefits, such as reducing the total interest you’re charged on your loan, or clearing your debt ahead of schedule.

Check your loan’s terms and conditions before putting extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or even the same day, in some cases.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

Who calculates your credit rating/score?

Credit ratings/scores are calculated by credit reporting bodies. The main bodies are Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service.

Where can I get a personal loan?

The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:

There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.

Can students with no credit history get loans?

It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult and/or expensive than for borrowers with a good credit history.

Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

Can I get an easy/instant personal loan?

Some lenders are able to approve applications over the internet and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.