What is a secured loan?

A secured car loan is a loan that uses an asset, such as a vehicle as security against the loan. What this means is that if you were to stop making repayments or default, the lender can come and repossess the vehicle to recoup their losses.

What is an unsecured loan?

An unsecured loan or personal loan is a loan that doesn’t have any security taken out against it. A credit card or personal loan are both examples of unsecured loans.

What is the difference between secured and unsecured loans?

The main difference between a secured and unsecured loan is whether or not security in the form of an asset or vehicle is held against the loan. This can also have a bearing on the interest rate that is offered for the loan product. Generally, lenders are able to offer lower interest rates on secured loans since there is less risk involved for them.

The advantages and disadvantages of a secured loan


  • Secured loans tend to offer lower interest rates
  • Secured loans are generally used to finance higher borrowing amounts


  • If you were to stop paying or default on a secured loan, the asset or vehicle can be repossessed by the lender to cover their costs

The advantages and disadvantages of an unsecured loan


  • You are not required to put up an asset as collateral for the loan
  • Can be used for multiple purposes other than just purchasing a vehicle


  • Generally have higher interest rates because there’s more risk for the lender

Still not sure which car loan option best suits your needs?

It all depends on your individual circumstances and what type of vehicle you’re planning to purchase. One important point to remember, however, is that unsecured car loans and personal car loans will generally have significantly higher interest rates compared to secured car loans because of the risk it represents to the lender. So, if you’re looking for the lowest rates, consider a secured loan, if for some reason a secured loan doesn’t suit your needs, then consider a personal or unsecured loan.

If you’re thinking which car loan best fits you, it all depends on the circumstances you’re in and what your goals are. Just take note that unsecured car loans often have higher interest rates compared to secured car loans. As well, you’ll have to double check your credit rating to give you a better idea of just how much you can borrow.

We are here to help

Ready to take the next step towards owning your next car? Use our handy instant online quote system to find out your individual rate and repayments on a secured loan or personal loan, it takes less than a minute, and it won’t affect your credit score.

Still have questions?

Call us on 1800 538 287 our friendly Finance Consultants are here to help.