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What’s the difference between car, secured and unsecured personal loans?

Hi Everyone,

Thought we might just take this opportunity to explain the differences between a car loan, secured personal loan and a unsecured personal loan

Car Loan

A car loan is often referred to a secured personal loan and works in the same way. The security is the vehicle you are purchasing and the bank has the security of the vehicle until the loan is paid out in full. The other features of these loans are

  • Fixed interest rate for the period of the loan
  • Normally a 3-5 year term but some lenders will go to a maximum of 7 years
  • Fees and charges can be included in the finance
  • All lenders will have a maximum loan value ratio against the vehicle. Lenders use the glass value of the vehicle to work out the LVR
  • Additional payments can be made and early payout of loans can be done, some lenders will have a small fee for paying out the loan early

Secured Personal loan

A personal loan can be used for other purchases and the vehicle is put up as security.

  • Personal loan are normally between $5000 to $45000
  • Can be used to fund, consolidated debt, weddings, overseas holidays plus others
  • Fixed interest rate for the life of the loan
  • Most lenders will allow you to the loan off early and many lenders have no early payment fees applied
  • Security- if the customer owns a motor vehicle outright with no finance on the vehicle, this vehicle can be used as security and therefore the customer will get a discount on the interest rate
  • Once the vehicle is used as security then for any reason you cannot maintain payments on the loan, the lender can take ownership of the vehicle used a security

Unsecured Personal loan

There is no security involved so interest will be higher.

  • Personal loan are normally between $5000 to $45000
  • Can be used to fund, consolidated debt, weddings, overseas holidays plus others
  • Fixed interest rate for the life of the loan
  • Most lenders will allow you to the loan off early and many lenders have no early payment fees applied
  • Credit scoring is used by most lenders to determine if a client is suitable
  • Interest rate will be higher than a secured personal loan
  • Term of the loan can be anything between 1-5 years normally

I hope that provides a brief overview of the loan types and if you want to discuss any of these matters further, please get in contact with us.

Created by Paul Newell

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