Secured Loans

How a Secured Loan Works

When you take out a secured loan, the lender registers a financial interest against your asset through the Personal Property Securities Register (PPSR). This is a national online register that records security interests over personal property in Australia. The registration lets other parties know that the asset is being used as security for a loan.

You continue to use the asset as normal throughout the entire loan term. The lender can only take action on the asset if you default on the loan. Once you repay the loan in full, the PPSR registration is removed and you have complete, unencumbered ownership of the asset again.

This process is standard across Australia and applies to a wide range of assets including cars, boats, caravans, motorbikes, trailers, and commercial equipment. Whether you are financing a new purchase or using an existing asset to secure a personal loan, the PPSR registration process is the same.

Why Secured Loans Have Lower Interest Rates

The key reason secured loans attract lower interest rates comes down to risk. When a lender has an asset backing the loan, their risk of losing money is significantly reduced. If the borrower cannot repay, the lender has the option to recover the outstanding amount by selling the secured asset. This safety net means the lender is more willing to offer favourable terms.

That lower risk translates directly into lower interest rates for you as the borrower. For example, a secured car loan might have a rate starting from 6.99% per annum, while an equivalent unsecured personal loan could be 12% or higher. Over a 5-year term on a $30,000 loan, that difference could save you several thousand dollars in total interest paid.

Beyond the rate itself, secured loans also tend to come with higher borrowing limits and more flexible terms. Lenders are simply more comfortable lending larger amounts when they have an asset to fall back on, which gives you greater purchasing power.

Types of Assets Accepted as Security

A wide range of assets can be used to secure a loan. The most common include:

• Cars and utes (the most common form of security, typically under 15 years old)
• Motorbikes
• Boats and jet skis
• Caravans and motorhomes
• Trailers
• Commercial vehicles and trucks
• Machinery and equipment
• Other valuable assets on a case-by-case basis

The asset generally needs to be worth enough to cover the loan amount. Age limits vary by lender, with most accepting vehicles up to 12 to 15 years old at the end of the loan term. If you are unsure whether your asset qualifies, our brokers can check across our panel of 30+ lenders to find one that will accept it.

What Happens to Your Asset

You keep full use of your vehicle, boat, or other asset throughout the life of the loan. A secured loan does not mean the lender takes possession of the item. You drive your car, take your boat out on the water, and use your caravan on holidays just as you normally would.

The only restriction is that you cannot sell or dispose of the asset without the lender's consent while the loan is active. You are also expected to maintain insurance on the asset, which usually means comprehensive insurance for vehicles. This protects both you and the lender in the event of theft, accident, or damage.

Once the loan is paid off in full, the security interest is removed from the PPSR and you have full unencumbered ownership. There are no ongoing obligations or registrations after the loan is settled.

Secured Loan vs Chattel Mortgage

A secured personal loan and a chattel mortgage both involve using an asset as security, but they serve different purposes. A secured personal loan is a consumer product designed for individuals purchasing assets for personal use. A chattel mortgage, on the other hand, is a commercial finance product for businesses.

If you are buying a vehicle or equipment for business use, a chattel mortgage may be more tax-effective. Businesses that are registered for GST can claim GST credits on the purchase price and may also be able to claim tax deductions on depreciation and interest. For personal use, a secured personal loan is the standard and most appropriate option.

If you think a chattel mortgage might suit your situation, you can learn more on our chattel mortgage page.

How to Apply for a Secured Loan with Loans123

Applying for a secured loan through Loans123 is straightforward. Start by gathering your details: the asset information (make, model, year, and approximate value), along with your personal and financial details including income, employment, and existing debts.

From there, you can submit an application online through our website or call our team on 1800 079 147. We compare rates from over 30 lenders on our panel to find the most competitive secured loan for your circumstances. Once you choose the best option, we handle settlement and the funds are deposited into your account.

Many secured loans are approved within 24 to 48 hours. Our brokers guide you through each step, so you always know where your application stands and what comes next.