Australia
Secured vs Unsecured Personal Loans in Australia: Costs, Risks and How to Choose
Secured borrowing is several points cheaper and puts an asset on the line. The trade is explicit.
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- Secured rate
- About 5%-10%
- Unsecured rate
- About 7%-20%
- Security
- Car or other asset
- Risk
- Repossession on default
The rate gap is large and real
Several points on $20,000 is over $1,000 across three years. That is the price of not pledging an asset.
Secured loans need the asset to be adequate
The lender values it and caps the loan against it. An old car will not secure a large loan.
Unsecured is faster and simpler
No valuation, no lien, no repossession. For smaller amounts the rate gap is worth less than the paperwork.
Pick by whether you can lose the asset
If the car is essential to your income, pledging it concentrates risk. If it is replaceable, the saving is worth taking.
VerdictSecured only when the asset is replaceable and the saving is meaningful. Otherwise unsecured.
FAQ
Can I get an unsecured loan for a car?▾
Yes, at a higher rate.
What can secure a loan?▾
Usually a vehicle, sometimes savings.
Does securing affect the comparison rate?▾
It lowers it.
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