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Secured and unsecured personal loans

Secured and unsecured personal loans

A personal loan is a tried and trusted way to finance a large purchase or consolidate and pay-off debts. Popular reasons for taking out a personal loan include:

Buying a car

Buying furniture

Buying whitegoods and appliances

Paying for a holiday

Paying for home renovations

Paying off other debts like credit and store cards

There are two main types of personal loan - secured and unsecured. The purpose of your loan will determine which type of loan you need to apply for.

What is a secured personal loan?

A secured personal loan is a loan ‘secured’ by collateral - a valuable possession that you own. Most secured personal loans are secured against a car, and hence are commonly called ‘car loans.’

If the borrower defaults on the loan, that means fails to make the repayments, the lender can repossess the security to try and get their money back.

What is an unsecured personal loan?

A personal loan has no security for the lender. There is no car or other valuable asset that can be repossessed if the borrower fails to make repayments. 

Pros and cons of secured and unsecured personal loans

A secured personal loan generally has a lower interest rate than an unsecured personal loan. If you are buying a car or other valuable asset, look for a secured personal loan.

An unsecured personal loan can be used for many purposes, including consolidating and repaying other debts, but is generally more expensive for the borrower. This is because an unsecured personal loan is more risky for the lender.

Looking for a personal loan? What to watch out for:

When comparing deals in the personal loan market, look out for fees and charges. Always check out the comparison rate, as well as the headline advertised interest rate. The comparison rate includes the cost of fees and charges.

Most importantly, stick to highly reputable lenders such as those listed on Some personal loan providers, particularly some online payday loan providers are not reputable and sell very expensive small loans, often to borrowers who can’t really afford to repay the debt.

Compare Unsecured and Secured Personal Loans Today

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Today's Loan Rates

Institution Product Rate (%) Comparison
Rate* (%)
Car Loan 12.74 13.62 Go to site
Car Loan 12.74 13.62 Go to site
Car Loan 12.74 13.62 Go to site
Unsecured Personal Loan 12.99 14.06 Go to site
RateSetter Unsecured Personal Loan 3.57 Go to site
Institution Product Rate (%) Comparison
Rate* (%)

The comparison rates are calculated on variable and fixed rates (unsecured loans) $10,000 over 3 years & secured car loans $10,000 over 3 years. WARNING: This comparison rate is true only for the examples given 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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