Secured personal loans: lower rates against an asset

How Secured Personal Loans Work

A secured personal loan works the same as any other personal loan, you borrow a fixed amount and repay it in regular instalments over an agreed term. The difference is that you offer an asset you own (or are purchasing) as security for the loan. This security gives the lender a fallback if the loan is not repaid, which significantly reduces their risk.

Lower risk for the lender translates into a lower rate, and the published ranges show where. At the bottom, CommBank's secured car loan starts at 6.79% p.a. against 7.25% p.a. unsecured, a saving of about $391 in interest on $30,000 over five years. At the top, it stops at 11.29% p.a. against 22.25% p.a.: $657 a month instead of $833, or about $10,570 less interest over the five years.

That makes security most valuable if your credit history would not get you a floor rate, and for larger amounts used for things like debt consolidation, home renovations, or medical procedures.

Accepted Security Types and How They Are Valued

Understanding what you can offer as security and how lenders value it helps you maximise the benefit of a secured loan. Here is a detailed breakdown of the most common security types:

Motor vehicles

Cars, utes, vans, and motorcycles are the most widely accepted form of personal loan security, and the major banks publish their secured rates as car loan rates. Lenders set age limits on the vehicle at the end of the loan term, value it with industry guides such as Glass's Guide or RedBook, and register their interest on the PPSR (Personal Property Securities Register). You keep driving the car as normal.

Boats and marine vessels

Recreational boats, jetskis, and marine equipment can secure personal loans. Valuations are based on market guides and condition, and lenders usually lend a lower share of the value than on a car because the resale market is less predictable.

Caravans, campervans, and trailers

With the growth of caravan and camping culture in Australia, these assets are increasingly accepted as security. Newer, brand-name caravans are preferred by lenders.

Term deposits

If you have a term deposit with a bank, you can sometimes use it as security for a personal loan while keeping the deposit earning interest. This can result in very low net borrowing costs if the term deposit rate is close to the loan rate.

Secured vs Unsecured: Making the Right Choice

Choosing between secured and unsecured comes down to weighing the rate advantage against the requirements and implications of providing security. Here is an honest comparison:

Choose secured if

You own a suitable asset outright (no existing finance on it), you are borrowing $10,000 or more where the interest savings become substantial, you want access to higher borrowing limits, or you have imperfect credit and need to offset the risk with an asset to access a reasonable rate. The process is slightly longer as the asset needs to be valued and the security registered.

Choose unsecured if

You do not own a suitable asset, you need funds urgently and cannot wait for the asset valuation process, you are borrowing a smaller amount where the interest savings are modest, your credit is excellent enough to get a floor rate anyway, or you prefer not to have an asset tied to a loan. Learn more about unsecured personal loans.

The PPSR and What Security Registration Means

When you use an asset as security for a loan, the lender registers their security interest on the Personal Property Securities Register (PPSR). This is a federal government register that records security interests over personal property (not real estate, that uses different systems).

Registration means the lender has a legal claim over the asset until the loan is fully repaid. In practical terms, this means you cannot sell the asset without the lender's consent (the buyer would see the registration when doing a PPSR check), and if you defaulted on the loan after all other remedies were exhausted, the lender could repossess the asset.

Once you pay off the loan in full, the lender removes the PPSR registration and you have clear, unencumbered title to your asset again. PPSR registration is standard practice for any secured lending in Australia; it simply formalises the arrangement.