Secured Car Loans Australia
Fancy term, simple idea - a secured car loan uses your car to get you a better deal.
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Key takeaways
- Secured car loans usually offer lower interest rates, making them a good option if you're buying a new or near-new vehicle.
- Your car must meet certain criteria - like age and condition - to be accepted as security, so check this before applying.
- If you're not confident in meeting repayments, consider the risk - your lender can repossess the vehicle if you default.
What is a secured car loan?
A secured car loan uses the car you're buying as security for the loan. Lenders usually prefer the car to be new or in good condition, but some accept used vehicles. You can also use a secured car loan to refinance an existing car loan from another lender.
How does a secured car loan work?
Secured loans can offer you a lower rate of interest because the lender has less of a risk. If you default on the loan the car you've purchased will be repossessed by the lender. Secured car loans offer low interest rates that can be fixed or variable.
How do secured car loans differ to unsecured loans?
There are several key differences between these two types of loans:
- Loan amount flexibility. Secured loans are tied to the value of the car, so you might not be able to borrow extra for rego, insurance or other costs. Unsecured personal loans don’t have these limits - you can use the funds however you like.
- Vehicle requirements. Secured car loans often come with rules - for example, the car may need to be under a certain age or meet specific requirements. With unsecured loans, you can buy any car you want.
- Interest rates. Secured loans usually have lower rates because the lender has the car as security. Unsecured loans tend to be more expensive.
- What happens if you default. When you default on a secured car loan the lender is able to sell the vehicle to recoup its losses. If you default on an unsecured loan the lender has no right to your vehicle.
What's the difference between a secured interest rate vs an unsecured interest rate?
The lowest minimum interest rate for a secured car loan in March 2026 is 4.99% from Firefighters CU. The average across all minimum secured car loan rates is 7.54%.
In comparison, the lowest minimum interest rate for an unsecured car loan in March 2026 is 5.66% from Harmoney. The average across all minimum unsecured car loan rates is 8.11%.
Fixed vs variable rate secured car loans
Secured car loans can come with either fixed or variable interest rates and it's important to select the interest rate that best meets your needs. Let's look at the difference between them:
| Fixed interest rate | Variable interest rate |
|---|---|
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The benefits and drawbacks you should consider
- Competitive interest rate. Secured loans come with lower interest rates than unsecured loans, helping to keep your repayments manageable.
- The vehicle doesn't have to be brand new. Some lenders let you use a used vehicle as a guarantee for a loan, and cars up to around 12 years old at the end of the loan term can be eligible - check the individual lender's limit.
- Restricted loan amount. As the loan is secured you will generally only be able to use the loan amount to purchase the vehicle (and not for unrelated costs). You may find some lenders willing to extend this loan amount to purchase car insurance or something similar.
- Risking your vehicle. Although using your car as security lowers your repayments, it also means that if you default on your loan you will lose your car. Make sure you only take on a loan you can afford and keep on top of your repayments.
Is there anything to avoid with secured car loans?
- Over-estimating your repayments. Although using your new car as security has its benefits, it also means the lender can take it away if you default on your loan. Be sure to only take out loans that are manageable with repayments you will be able to meet.
- Not being aware of fees. If you do not familiarise yourself with the fees associated with a secured car loan from a particular lender, you may end up paying more than you thought you would. Some lenders have lower fixed interest rates, but then have monthly fees which mean you end up paying more anyway. Be aware of all aspects of your loan.
- Not choosing a loan that meets your needs. It's really common for people to choose a loan that they regret in a few years time. You could be paying off this loan for a while, so make sure you take into account possible changes in your financial circumstances. You may receive a promotion and want to increase your repayments to pay off your loan sooner, but your lender may not allow that. Make sure you check all the limits of the loan and how flexible it is.
Example: Chris decides on a secured car loan
Chris had his eye on a $30,000 sedan - something reliable for work, but still fun on weekends. He didn’t want to dip into savings, so he started looking at loan options.
He considered an unsecured personal loan first, but the rate was 7.75% p.a. That meant monthly repayments of about $607, adding up to $36,420 over five years.
Then he looked at a secured car loan with a rate of 6.49% p.a. - lower because the car would be used as collateral. That dropped his repayments to around $586 a month, or $35,160 in total.
By going secured, Chris saved $21 each month - more than $1,200 over the life of the loan.
How you can compare the different secured car loans available
There is a range of secured car loans available from a number of different lenders. Finding the best secured car loan for you will depend on things like your financial situation and the length of the loan you require, but there are some other factors which you can use to determine the quality of the loan.
- Interest rate and comparison rate. The rate of a loan determines what your repayments will be and differs greatly between lenders. Comparison rates incorporate the total cost of the loan so be sure to compare this before you apply.
- Fees. These can include establishment fees upon accepting your loan and ongoing fees such as loan service fees. Compare fees in addition to the interest rate and loan features to make sure you're getting a good deal.
- Loan term. Lenders set specific loan terms (usually between one and five for fixed rate loans and one and seven years for variable rate loans) that you can select from. Make sure your lender lets you repay the loan in a period that is suitable to your budget.
- Minimum and maximum loan amount. A typical minimum loan amount is $5,000 while the maximum amount varies greatly between lenders. Some lenders don't have a maximum borrowing amount and keep this as a case-to-case determinant. Keep this in mind depending on what car you're going to buy.
- Additional repayments. Some lenders offer the ability to make additional repayments to pay your loan off sooner. If you think you'll be able to put more money towards your loan then ensure you include this feature in your comparison. Keep in mind that some lenders will charge fees if the loan is paid out earlier than expected, so if you think you'll be able to do this then seek a loan without these penalties.
- Other features. Loans come with various features to help you manage it better. Some lenders offer discounted insurance products with the loan and others offer vehicle finding services.
How much can I borrow?
With a secured car loan, the loan amount you are offered will be dependent on the value of the vehicle you're purchasing. If you have not found the vehicle you want to purchase yet, the bank or lender may offer you pre-approval for a certain amount so you know how much you can spend on a vehicle. When you arrange to buy the vehicle the lender will pay the car dealer/private seller directly.
Whether or not you're able to include additional upfront costs such as insurance and registration in the loan amount will depend on the lender and how much you've been approved for.
What happens if you default on a secured car loan?
If you miss repayments on a secured car loan, the lender may eventually repossess and sell your vehicle to recover the money owed. However, this is usually a last resort.
If you're facing financial hardship, it’s best to be proactive and contact your lender as soon as possible. Most lenders have hardship teams and are willing to work with you - whether that’s through a payment pause or another arrangement to help you get back on track. Reaching out early can make a big difference.
Questions we are frequently asked about secured car loans
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What is the “repayment amount”?
Hi Riana,
Thanks for your question.
The repayment amount is the amount you have to pay on your loan, which will be the original amount you borrow plus interest. This is either in periodic installments, say monthly, or the total amount you have to repay at the end of the loan term.
I hope this has helped.
Thanks,
Elizabeth
I own land to value of $140 000, can I secure it for car loan with casual employment with no bad credit.I want to buy near or new commodore and repay over 7 years
Hi Sarah,
Thanks for your question.
Secured car loans work with the loan being secured to your newly purchased vehicle. However, some lenders may look more favourably on your application if you hold equity in your property. You can consider some of the lenders that offer bad credit car loans.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.
I hope this has helped.
Thanks,
Elizabeth