Secured vs unsecured personal loans

Secured and unsecured loans compared

NAB’s explanation of the two structures provides an overview. Both require a credit assessment; having an asset does not guarantee approval.

Worked example: what does the lower rate actually save?

Imagine borrowing $20,000 over five years. These are hypothetical loans, not lender offers or current PLF rates. Both repay the full balance through monthly instalments with no balloon.

The secured example costs $979.23 less overall. Its interest saving is larger, but the upfront and monthly fees use up $780 of that difference. The question is whether the remaining saving and other terms justify pledging the asset in your circumstances.

Secured car loans: check the vehicle and the purpose

A secured personal loan is not automatically available for every car or every expense. Before committing to a purchase, ask about the car’s age, condition, value, existing finance, seller type, insurance and required documents. Check whether rules apply when the loan starts, when it ends, or both.

For example, CommBank’s secured car-loan page states that its security car must be ten years old or less, have no existing finance owing and be comprehensively insured. These CommBank conditions were checked on 2 October 2026; other lenders have their own rules.

Compare new and used cars using the full purchase budget: price, transfer charges, registration, insurance and immediate repairs. Ask which costs the loan can cover. A product restricted to a vehicle purchase is different from a general loan secured by an asset you already own.

On PLF, choose “Car loan” as the purpose, then compare secured and unsecured results for the same amount and term. Check the product details before assuming that a low headline rate applies to your car. Filtering helps find options; it does not confirm asset acceptance or approval.

Buying privately or buying a used car

First confirm the lender accepts the purchase arrangement and ask how the seller will be paid. If the vehicle has finance owing, obtain clear instructions for settling that debt rather than assuming an informal promise from the seller is enough.

The official Australian Government PPSR search costs $2 online. Search using the correct VIN on the day of purchase or the day before and keep the certificate. It identifies registered security interests and may include available stolen or written-off information.

A PPSR result is not a mechanical inspection, and vehicle-history information may be incomplete or out of date. Arrange appropriate vehicle and registration checks as well. Do not confuse a paid third-party vehicle report with the official $2 search.

Compare flexibility separately from security

“Secured”, “unsecured”, “fixed” and “variable” describe different features. None is a complete fee policy. Ask these questions for both quotes:

• Can I pay extra, and is there a limit or charge?
• What would it cost to close the loan after one or two years?
• Can I redraw extra repayments, and on what terms?
• Is there a balloon or other final payment, and how would I fund it?
• Are fee waivers conditional, and have I met those conditions?

The difference is real: CommBank’s secured fixed-rate car loan allows extra repayments but does not offer redraw, and an early repayment adjustment can apply under its conditions. NAB’s published secured car-loan features include no early payout penalty but also no redraw. Check the specific contract rather than inferring flexibility from the loan type.

Use the fee checklist and comparison-rate guide when checking quotes.

What happens if you cannot repay?

Secured loan: repossession and sale can reduce the debt without clearing it. You may still owe a shortfall, and recovery costs can add to the amount owing. Moneysmart explains repossession and remaining debt. Consider how losing the car would affect your work, family and ability to earn.

Unsecured loan: the absence of a pledged asset does not cancel the debt or stop collection and possible legal action. Read Moneysmart’s debt-collection guidance if someone contacts you about a debt.

If repayments become difficult, contact the lender early about hardship assistance. If a default or legal notice arrives, act promptly. The National Debt Helpline offers free support on 1800 007 007.

Which type is better for your situation?

Use these questions to organise the decision:

1. Does the product fit? Confirm your purpose, proposed asset, amount and term are accepted.
2. What is the genuine saving? Compare the actual quotes over the same term, including fees and any final payment.
3. Can your budget handle it? Leave room for running costs and foreseeable changes.
4. How important is the asset? Consider the practical consequences of losing it, not only its resale value.
5. Does the repayment plan fit? Check early payout and extra-payment terms if you expect to pay faster.

If neither repayment works comfortably, revisit the purchase budget or timing before choosing between loan structures. Offering security does not make an unaffordable repayment affordable.

Explore secured personal loans and unsecured personal loans, then test the figures in the repayment calculator.