What is a Secured Personal Loan?

Life often throws financial challenges our way. Things like home renovations, medical emergencies, and big-ticket purchases can all put a serious dent in your bank account. For those moments when savings fall short, a secured personal loan can provide the financial support you need. But what exactly is a secured personal loan and how does it work? We’ll cover everything you need to know about this type of financing to help you decide if a personal loan is the right option for you.

Overview:

• How do Secured Personal Loans work?
• What can you use a secured personal loan for?
• Secured vs unsecured personal loan
• What are the advantages and disadvantages of a secured loan?
• What if I’ve been rejected by the bank?
• Does a secured loan hurt your credit?
• How can a loan broker help?

How do Secured Personal Loans work?

A secured personal loan is a type of financing that uses something you own as security for the loan. Using an asset as collateral for the loan means there’s less risk for the lender, and they might be able to offer you lower interest rates or a larger amount of money. Any valuable assets like property, machinery, or jewellery can be accepted as collateral, depending on the lender. But the most common assets used for secured personal loans are cars and property.

What can you use a secured personal loan for?

The best part about a secured personal loan is it can cover a range of costs, from medical bills to big ticket home items. Some common reasons for a personal loan include:

• Medical costs: Putting off treatments because of the cost isn’t good for our mental or physical wellbeing. Getting a personal loan can help you take care of those unexpected procedures or treatments when they come up.
• Dental costs: Since they’re not currently covered by Medicare, many people put off the cost of dental check ups and treatments. A secured personal loan can give you what you need to start smiling brighter.
• Weddings: Between securing the right venue and having enough food, weddings are stressful enough without adding financial pressures. A personal loan can help your big day become worry free, so all you have to do is say I do.
• Holidays: Whether you’re feeling burnt out at work or just need a break from your routine, a holiday is the perfect way to escape and relax. Secured personal holiday loans can help you finance your dream destination without having to compromise on cost.
• Home renovations: There’s always something around the house that needs doing, but when it comes time for the big jobs like adding an extension or redoing the floors, sometimes you need some extra funds. A personal loan for home renovations can help you get the work done sooner.

Need a loan to help you purchase a car? Check out our vehicle finance options. And remember, just because your reason isn’t on the list, doesn’t mean you can’t get a secured personal loan. Talk to our expert brokers to find the right solution for you.

Secured vs unsecured personal loan

You might have heard about secured personal loans when comparing them to unsecured loans. The main difference between them is that an unsecured loan does not use any collateral to help secure the amount that you borrow. That usually means interest rates are slightly higher, so you’ll pay back more over the course of the loan. But if you don’t want to risk your assets, an unsecured loan might be the better option. And just like any financial decision, it’s important to weigh up the advantages and disadvantages of each loan type.

What are the advantages and disadvantages of a secured loan?

To make sure a secured personal loan is right for you, let’s look at some of the advantages of a secured loan:

• Since your asset reassures the lender they can recoup the cost of the loan, you may get a lower interest rate and save money in the long run
• Having some collateral means you pose a lower risk, so you could be able to borrow more money than you initially thought
• A lower risk of lending makes them a great option for casual and part-time workers

Of course, a secured personal loan isn’t right for everyone, so let’s look at some of the disadvantages of a secured loan:

• You’ll need to have an asset with a value equal to amount you’re borrowing
• If you’re unable to make payments, you might lose that asset

What if I’ve been rejected by the bank?

With our large network of specialist lenders, the chances of us finding a suitable loan for you is still very high, provided you meet our eligibility criteria. You’ll need to:

• Be 18 years old or over
• Have a regular income
• Have not filed for bankruptcy
• Be a permanent Australian resident or relevant visa holder

Does a secured loan hurt your credit?

Like all forms of credit, secured personal loans can damage your credit score if you fail to make regular payments or repay the loan in full. But if you manage your debt responsibly then a secured loan can help boost your credit rating over time. And, of course, everyone’s situation is unique, so for more advice on whether it’s right for you, speak to one of our brokers.

How can a loan broker help?

As the financial experts, we’ll scour through our network of lenders to find the best loan terms for you, helping you save time and hassle in the application process.

If you’re interested in learning more or taking the next step towards your application, contact us today to get started.