Secured Car Loans

Did you know that you can use the vehicle you’re purchasing as collateral for a car loan? By doing this, lenders often offer better interest rates and lower fees, which can save you a significant amount of money over the life of your loan. This type of loan is known as a secured car loan.

While it may sound like a great option before you commit, there are a few things to keep in mind.

1. Secured loans can put your assets at risk

Lenders offer their best car loan deals to borrowers using their car as security because they can sell the car if the loan isn't repaid. It's essential to evaluate your finances before taking out a secured loan. 

Use our car loan repayments calculator to ensure payments fit your budget, accounting for possible changes in income or expenses. If you’re hesitant to risk your car, consider an unsecured loan. While it doesn’t require surrendering the car, lenders can still pursue legal action, and your credit rating may suffer.

2. Vehicle age restrictions apply

Most lenders require vehicles to be no more than 7 years old at the end of the loan term, though premium lenders may extend this to 10 years for luxury vehicles. This is because newer cars retain their value better, offering secure collateral. For electric vehicles (EVs), lenders often have more flexible age requirements and special ‘green car’ rates due to the emphasis on sustainable transportation.

3. Borrowing capacity and collateral options

If you own a property you can also use this asset as security for a car loan and the provider will be more inclined to lend you a larger amount (with many offering secured car loans with maximum borrowing amounts of $100,000 and over), as you're deemed a lower risk. However, just like using the car you are buying as collateral, using your home as security will put it at risk if you're unable to service the car loan.

4. Insurance requirements

Also keep in mind that many banks will require you to take out comprehensive car insurance (which covers damage to your car, other people's car and property etc) to be eligible for a secured loan. But when you consider that you'll be covered for all those unforeseen mishaps on the road, this isn't necessarily a bad thing.

5. Loan completion and security release

The great thing is if you diligently repay your car loan on time each month and in full, you will pay off the secured loan in the agreed timeframe, the security over your asset will be removed and those new wheels are officially all yours.

How do secured car loans work

Secured car loans operate on a straightforward principle: the vehicle serves as collateral for the loan, reducing the lender's risk and typically resulting in better interest rates for borrowers. 

Here's the process:

1. Application and assessment

• Lender evaluates your credit profile and financial situation

• Vehicle details are assessed for eligibility

• Income and expenses are verified through bank statements and documentation

2. Security registration

• Lender registers their interest in the vehicle on the PPSR

• This legal registration prevents the car from being sold without the loan being repaid

• Documentation is provided confirming the security arrangement

3. Loan management

• Regular payments are made according to the agreed schedule

• Extra repayments may be allowed depending on loan terms

• Security remains in place until the loan is fully repaid

What should I look for in a secured car loan?

Now that you've read our secured loan must-knows, here are some of the things you should consider when choosing a car loan:

• Fixed vs variable: Car loans have two types of interest rates. A fixed rate keeps the same monthly payments throughout the loan while a variable rate can change on a whim. 

• Fee free extra repayments: If you take out a car loan for a long term, using an extra repayments feature can help you pay it off faster. For example, on a $20,000 loan at a 15% interest rate over 5 years, making an extra monthly repayment of $200 would save you $3,418 in interest and shorten the loan term by nearly 2 years.

• Redraw facility: A redraw facility can be useful, letting you access extra repayments on your car loan. However, be cautious as withdrawing funds can extend the loan term and increase total interest paid.

• Flexible repayments: Choose a car loan that lets you select your repayment cycle—weekly, fortnightly, or monthly. Opting for weekly or fortnightly payments can help you get ahead on repayments, effectively making an extra month's payment each year without realising it.

What’s the difference between an unsecured and secured car loan? Car loans vary, and understanding the differences can help you save money. Unsecured loans typically have higher interest rates because they are not tied to an asset. In contrast, secured car loans often offer more competitive rates since they are backed by the vehicle you are purchasing or another asset, such as your property.

This difference in rates can significantly impact your total repayment amount. 

For example, on a $25,000 loan over 5 years:

• Secured at 6.99% p.a.: Total interest paid = $4,695

• Unsecured at 9.99% p.a.: Total interest paid = $6,863

That means if you are in a position to take out a secured car loan to purchase your vehicle, you could end up saving money in the long run! How do I apply for a secured car loan? Found the right loan for you? Well not only is it fast to apply for a secured car loan online, it’s fairly easy too. Whether you're looking for a new car loan or a used car loan, just remember that you may need a few bits of information to complete the application.

The process for digital loan applications may include steps such as:

Preparation

• Gather your identification documents

• Collect recent payslips or tax returns

• Have 3 months of bank statements ready

• Details of the vehicle you plan to purchase

Application submission

• Complete the online application form

• Upload required documents electronically

• Provide vehicle information

• Submit for assessment

Approval and settlement

• Receive conditional approval

• Finalise vehicle purchase details

• Complete insurance arrangements

• Sign loan documents electronically

• Receive funds for vehicle purchase

Most lenders now offer same-day conditional approval and can complete the entire process within 1-2 business days for straightforward applications.

Keen to jump in? Check out and compare car loans from all providers we track on the main hub page. If you’ve already secured a loan, you may want to check out our car loan refinance page.