What Is a Secured Personal Loan? Your Guide

What Is a Secured Personal Loan? Your Guide

A secured personal loan is one of the most common types of personal loans in Australia, especially for people who want to understand how using an asset as security can affect interest rates and borrowing limits. However, secured loans also come with important trade-offs — mainly that you may be required to pledge an asset (like a car) as security.

In this guide, we explain what a secured personal loan is, how it works, the potential pros and cons, what lenders may look for, and how secured loans compare with unsecured personal loans. The aim is to help you build financial literacy so you can make more informed borrowing decisions.

What is a secured personal loan?

A secured personal loan is a loan backed by an asset — known as collateral. This collateral acts as security for the lender. If the borrower cannot repay the loan, the lender may have the right to repossess or sell the asset to recover the outstanding balance (this depends on the contract terms and applicable laws).

Secured personal loan meaning

“Secured” means the loan is tied to an asset of value.

That asset can reduce the lender’s risk.

Because the risk to the lender may be lower, secured loans can sometimes have lower interest rates than unsecured loans (though rates and costs vary by lender and borrower circumstances).

Why lenders prefer secured loans

Collateral can give lenders a safety net. If something goes wrong, the asset may help reduce the lender’s loss. This relationship between risk and security is one reason secured lending exists.

Types of collateral accepted on secured personal loans

Most lenders accept assets that hold significant resale value. Common examples include:

1. Vehicles

• Cars
• Motorbikes
• Boats
• Caravans

Lenders may consider the age, condition, and estimated market value of the vehicle. In general, newer vehicles may support higher loan amounts, depending on the lender.

2. Property
Some lenders may accept equity in a home or land as security, although this is less common for standard personal loans and may involve additional steps and costs.

3. High-value assets
Some providers may accept:

• Jewellery
• Machinery
• Business equipment

The loan amount is often linked to the estimated market value of the collateral. For example, if a car is valued at $8,000, a lender may offer a maximum amount below that value to help manage their risk.

Pros and cons of secured personal loans

Pros

Lower interest rates
Because the loan may be less risky for the lender.

Higher borrowing limits
Security may allow access to larger loan amounts than an unsecured loan, depending on the lender.

Easier approval for some borrowers
Some borrowers with limited credit history or lower credit scores may find secured loans more accessible, though approval is never guaranteed.

Longer loan terms
Some lenders may offer longer terms for secured loans, which can reduce repayment amounts — but may increase total interest paid over time.

Cons

Risk of losing your asset
If you can’t meet repayments, the lender may be able to repossess and sell the collateral (subject to the loan contract and legal requirements).

More paperwork and assessment
Asset checks, valuations, and documentation can make the application process longer.

Restrictions on asset type
Not all assets are accepted, and some lenders may not accept older vehicles or assets with uncertain resale value.

Potential insurance requirements
Some lenders may require comprehensive insurance on the secured asset (for example, when a vehicle is used as collateral).

How to get a secured personal loan

Although each lender has its own process, applying for a secured loan generally involves the following steps:

1. Choose your collateral
Pick an asset of sufficient value and check that it meets the lender’s criteria.

2. Gather documentation
This may include:

• Proof of identity
• Proof of income
• Bank statements
• Asset ownership documents
• Registration papers (for vehicles)
• Insurance details (if required)

3. Submit your loan application
The lender may assess your financial situation, including income, expenses, credit history, and existing debt obligations.

4. Asset evaluation
The lender may:

• Check the asset’s condition
• Confirm ownership
• Perform a market valuation
• Check whether the asset is already under finance

5. Approval and contract
If approved, you’ll receive a loan contract outlining:

• Interest rate
• Fees and charges
• Repayment terms
• Conditions relating to the collateral

6. Loan funding
Funds are typically released once documents are signed and the security is formally recorded (processes vary by lender).

Best tips when getting a secured personal loan

Before committing, consider the following general tips:

Choose the right collateral
Only use an asset you can reasonably afford to risk. For example, using your primary car may create practical challenges if you experience financial hardship.

Understand the loan terms carefully
Check the interest rate, all fees and charges, repayment schedule, and what the contract says happens if you miss a payment.

Manage repayments proactively
Use reminders, set up automated transfers, and regularly review your budget. Many banks allow scheduled transfers or payments using Osko (availability depends on your bank and the lender’s payment options).

Check the lender’s insurance requirements
If comprehensive insurance is required, factor the ongoing cost into your budget.

Watch out for red flags
Be cautious of lenders who:

• Pressure you to borrow more than you need
• Provide unclear fee information
• Don’t ask questions about your ability to repay (lenders generally have obligations around responsible lending)

Secured personal loans vs unsecured loans

Many Australians ask: what is a secured personal loan vs unsecured — and which one is better? The right choice depends on your situation, priorities, and risk comfort level.

Because your CMS can’t display tables, here’s a clear side-by-side comparison in a scannable format:

Secured personal loans (generally)

• Require collateral (an asset as security)
• May offer lower interest rates in some cases
• May allow higher loan limits
• Usually involve more checks and paperwork
• Carry the risk of asset repossession if you can’t repay
• May suit some borrowers with average credit (depending on the lender)

Unsecured personal loans (generally)

• No collateral required
• Rates may be higher than secured loans in some cases
• Borrowing amount often depends on income, expenses, and credit history
• May be faster to apply for and assess
• No asset at risk as security
• Often used for more flexible purposes (subject to lender terms)

When to choose each option

Choose a secured loan if:

• You’re comfortable using an asset as security
• You’re aiming for a larger loan amount
• You understand the risks and the contract conditions

Choose an unsecured personal loan if:

• You don’t want your assets tied to the loan
• You prefer a simpler application process
• You’re borrowing a smaller amount
• You want repayments that are easier to predict in your budget

Don’t risk your assets: Get a personal loan with Credit24

If you’d rather avoid securing your car, property or valuables against a loan, an unsecured personal loan from Credit24 may be an option to consider (subject to eligibility and lending criteria).

Why choose Credit24?

• No collateral required
• Borrow $500–$10,000
• Use the money for your needs (within the loan terms)
• Fixed repayment schedule
• Fast, simple online application
• Quick assessment and funding (if approved)
• Transparent costs with no hidden fees
• Regulated under Australian Credit Licence 422839

Unsecured loans can offer flexibility without placing an asset at risk as security — but it’s still important to make sure repayments fit your budget.

Apply now

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839. The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.