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It might be time for you to get something BIG, and by BIG, we mean one of those things that create a new chapter in your life.
It might be a car, a boat, or a grand piano.
Whatever BIG purchase you’re going to make, it might be time to compare secured personal loans.*
Under a secured personal loan, an asset is used as collateral for the loan. This means that if you’re unable to make your repayments, the lender can repossess the asset in order to make up for their losses.
These loans generally have higher borrowing limits, lower interest rates, and longer loan terms when you compare them with unsecured loans.
As an example, the car you’re purchasing under a secured personal loan could be the asset you use in case you’re unable to continue paying it off. In this worst case scenario, your lender would claim your asset and write off your repayments that you’re unable to make.
If you’re looking at buying something expensive, like a car, then a secured personal loan could be the way to go. These loans are perceived as lower-risk to lenders because if you reach a point where you’re no longer able to make your repayments, then the lender has an asset they can take and sell.
When you think about it, it makes sense that lenders perceive secured loans as less of a risk for them, as you are more likely to make repayments when you have an asset on the line.
Although these types of loans are usually secured against major assets like a car or a house, ultimately, you can secure this type of loan on almost anything you’d like to purchase, as long as you have something of equal or greater value to secure it against.
You can generally borrow from $2,000 to $100,000, but this depends on your personal situation. The amount will vary, so it’s important you discuss this with your lender.
Further features of secured personal loans are listed in the table below:
|- This is the whole cost of the loan, which includes the interest rate and most of the fees.
- When you compare loans, make sure you’re looking at the same loan amounts and terms.
|- This is the rate of interest you’ll need to pay based on the amount you borrow.
|- Many banks and financial institutions have application fees.
|- Check if there’s a monthly service fee.
- There might also be a default or missed payment fee.
- Check the T&Cs to see if there are any other fees.
|- Some lenders charge a fee if you’d like to make extra repayments, so check this with your lender.
|- Major purchases such as a a car or major home renovations.
|- Usually one to seven years.
|- A redraw facility allows you to access funds you’ve already paid off, but sometimes there are additional fees to access this facility.
- With some loans, you may be able to earn back a portion of the extra repayments you make.
Generally, the good things about a secured personal loan are:
There are some downsides, too. Consider that:
If you’ve got a good credit rating and a steady credit history, it’s likely you’d be eligible. You’d need to speak with your lender for more tailored advice.
But if you find yourself in a position where you need a guarantor for your loan, it’s important that you and your potential guarantor both understand what’s involved with this process. Have a read through the Australian Government’s Moneysmart page on guarantors on loans here.
Under the conditions of an unsecured loan, you won’t need to provide any assets as collateral in the event of a default, whereas under a secured loan type, you do.
Unsecured loans are generally good options if you’re looking for a small loan for a short period of time.
But bear in mind that the interest rates for unsecured loans are usually higher, because the risk to the lender is higher. You might also need a guarantor on your application if this is your first loan.
Once you’ve compared our range of providers, you might be ready to apply for a particular loan.*
In your application, you might need to provide things like recent bank statements, payslips, phone or energy bills, or rental or mortgage repayments to prove you’re responsible and a low-enough risk for your lender to bank on you (pun intended).
Your lender may then perform a credit check before they approve your loan.
You might also need a guarantor, but this is only if your lender won’t give you a loan on your own. It’s important that you and your potential guarantor know exactly what’s involved in this process. For more information, check out the Australian Government’s Moneysmart page on guarantors in loans.
This whole process all depends on your unique situation, which includes your circumstances and personal financial goals.
If you’re ready to compare secured personal loans, you can start here online with iSelect*. See the range of providers and simply click on an option that suits you to begin your application.