Using a Secured Car Loan to buy your Car

A Secured Loan is a type of Car Loan that involves the lender having a security against the money you've borrowed from them, in this case the car itself. This means that if you're unable to make your loan repayments, the lender has the ability to repossess your car and sell if off to pay off the amount still owed.

A Secured Loan has some major benefits over unsecured loans (such as a Personal Loan). As lenders have your vehicle as security, they're more likely to offer better loan terms including longer repayment periods, higher borrowing limits and lower interest rates. This can lead to you paying back less in the long term.

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How does a Secured Car Loan work?

A Secured Loan is a more common type of loan that's available for Personal Use and Business Use. It functions similarly to how we understand a home loan works, where an asset is used as collateral for the lnder. In most cases the car is used as collateral, however, other assets, like a deposit, may also be used.

To meet criteria of a secured loan, the vehicle you're purchasing needs to fit into certain requirements such as car type and age. Usually lenders will offer a secured loan for cars that are less than 5 years old.

The alternative option is an unsecured loan, such as a Personal Loan, which are commonly used to finance older assets, or those where the lender is not seeking security. An unsecured loan often has a higher interest rate payable.

Features of a Secured Car Loan

  • Loan amounts - secured car loans are available from as little as $10,000 borrowing amount.
  • Competitive interest rates - which are most often fixed, secured loans have interest rates that are often best in the market.
  • Residual / balloon options - allowing you to reduce your monthly repayments.
  • Flexible purposes - can be used for both personal and business use.
  • Early repayment options - we have access to secured car loan products which allow you repay early with no fees.

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Common questions about Secured Loans

A car loan (which can be referred to as a secured car loan if security is sought by the lender) involves a finance company lending you the money to purchase an asset and retaining security over it for the life of the loan. Car loans can be arranged for both personal use (such as a consumer car loan) or business (such as a chattel mortgage).

By taking out a car loan to finance your next car you can reduce your overall cash outlay which you may want to use for other purposes (such as taking a holiday!). If you’re a business, a car loan may improve your cash flow, as well as potentially allowing you to claim a tax deduction for the car (check with your accountant for eligibility). 

There may be tax benefits if you are financing a car for business purposes. Please visit the ATO website, or speak to your accountant to understand potential tax deductions for your specific purposes. If you are considering a novated lease, you can use our novated lease calculator to get an estimate of the potential savings available.

A secured car loan is a relevant option for an individual or business looking to access lower interest rates and has sufficient serviceability. For an employee of a business looking to salary package benefits of their employment, a novated lease may be more appropriate.

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