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Put simply, a secured loan is a business loan that is ‘secured’ against a physical asset, often referred to as ‘collateral’ or ‘security. Secured business loans are generally provided for a fixed period of time and the types of physical assets which are commonly used to secure the loans include residential and commercial property, cars and vehicles, machinery and other equipment.
Secured loans are generally lower risk because if you fail to repay the loan, then your lender can recover their losses by taking ownership of liquidizing or selling the secured asset. Because they are generally seen as lower risk, the terms of secured loans are usually more favourable such as lower interest rates.
At iSelect we’ve partnered with Valiant to make it easy for our customers to easily compare a range of secured loan options. Click here to begin your secured loan application with the experienced team at Valiant.
Well, it really depends on your business situation. They key benefit of a fixed rate secured loan is the security of knowing exactly how much you’ll need to repay for the duration of your loan term. This can provide valuable certainty for your business budget and also protect you from any unexpected interest rate increases.
On the other hand, a variable rate secured loan means any drops in interest rates will lower your repayments and free up more cash for your business. But equally you open yourself up to be negatively impacted by any increases interest rate, putting more pressure on your budget. Of course, interest rate changes are far from guaranteed so just like with home loans, whether you opt for a fixed or variable secured loans will really depend on your personal preference and risk appetite.
Generally (but not always), the asset you will use as collateral to secure the loan will be the same asset you are using the loan to finance or buy. The assets most commonly used to secure a business loan are commercial and residential property, including your business premises.
Other assets commonly used for secured loans include cars and vehicles, stock and inventory machinery and other equipment. Depending on your business type, these can range from coffee machines through to forklifts or even large-scale farming irrigation systems.
However it isn’t only physical assets that can be used to secure loans. Non-physical assets which can be used include your business savings or unpaid invoices.
Because they are inherently less risky for lenders, secured loans can offer more favourable terms for businesses. Here are some of the key benefits of secured business loans:
Using an asset to secure your loan means you run the risk of having it seized if you fail to make your repayments. Here are some of the main drawbacks of a secured business loan:
Secured loans vary considerably between different lenders. Things to consider when comparing your options include:
Secured business loans do take a little longer to turnaround than unsecured loans, because of the time taken to assess the value of the asset you are using as collateral. That said, if the asset you are using isn’t already being used as security for another loan, secured loans can still be applied for and obtained relatively quickly as opposed to other types of business loans. Keep in mind the turnaround time can differ between lenders and loan products, so it’s a good idea to gauge which lenders typically process secured loans the fastest. The experienced team at Valiant can provide guidance in this area throughout your loan application process.
At iSelect we’ve partnered with Valiant to make it easier for iSelect customers to find a secured loan product that suits their business needs. Valiant compare a range of products from over 80 lenders across Australia, and can manage the process of finding and applying for your finance solution, as well as settling funds. Get started comparing online today!
Last updated: 28/01/2020