Car Loans

Compare secured car loans

Believe it or not, secured car loans aren’t for thief-proof cars. Compare secured car loans here with Savings.com.au.

Secured car loan rates

Below you can see a comparison of secured car loans below, across both fixed interest payment terms, for a $30,000 loan over five years.

To secure or not to secure, that is the question. Secured car loans often have the benefit of having a lower interest rate, and a lower comparison rate to boot. This is because you are using your car as security on the loan, meaning if you fail to pay your loan, the lender may take your car away. As a trade-off, you often receive a lower interest rate.

With the Reserve Bank’s cash rate at historic lows. some lenders are offering super low interest rates on car loans. However, you might find unsecured loans still carry higher interest rates. This is for the risks the lender assumes when taking the borrower on as a customer. By securing the car against the loan, the lender is able to offer a lower rate.

What is a secured car loan?

A secured car loan uses the car as security against the loan. This means that if you fail to pay the loan, the lender can have the right to repossess your car. This is essentially the opposite of an unsecured car loan, which are really just personal loans under a different name. Unlike a secured loan, an unsecured loan lender cannot take your car away if you fail to pay. Rather, they will attempt to get repaid through other means. As a result, an unsecured loan can have a higher interest rate than a secured one.

Is a car loan always a secured loan?

As you’ve probably gathered, a car loan isn’t necessarily always a secured loan. When browsing around, you might have discovered a personal loan dressed up as a car loan. These tend to be unsecured loans, just a personal loan intended to be used to purchase a car.

The biggest, and arguably the most obvious way, to tell unsecured and secured car loans apart is the interest rate. Say, Car Loan 1 has an interest rate of 5% p.a., versus Car Loan 2, which has an interest rate of 11% p.a. - you could probably assume that Car Loan 1 is a secured car loan because of its lower interest rate. However, this might not always be the case - it pays to check the finer details of the car loan product you’re looking at.

Using your car as security for a loan: what to know

Using your car as security for a loan - or a secured car loan - can be a way to get the loan you want with a lower interest rate compared to other loan types. However, one of the biggest things to be wary of when you have a loan against your car is that the vehicle can be taken away if you fail to repay the loan.

So, how long or how much would it take for a lender to repossess your car? Well that varies by state. For example, in Queensland, a repossession can’t take place without a court order if less than 25% of the initial debt or $10,000 (whichever is less) remains owing. However, if it’s over that limit, the lender can repossess your vehicle within 30 days after delivery of the default notice.

However, just because you have an unsecured loan doesn’t let you escape the consequences of defaulting on it. You could still face legal action and be chased by a collections agency, while your credit history will have a black mark against it and your rating will be smashed. Overall, it pays to check with your own state’s laws to see what takes place, in regards to repossession, should you default on your car loan.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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