Personal loan question: Is secured or unsecured right for me?

By Polly Fleeting ·
woman comparing secured and unsecured loan on her tablet

If you’re on the hunt for a personal loan, one question that may be on your lips is, should I choose a secured or unsecured loan

Ultimately, the type of loan you choose could influence things like the interest rate you receive, what you can borrow for and what fees are attached to the loan. 

So which personal loan is right for you? Let’s break it down: 

If you have some assets, like a car or a home, you may qualify for a secured personal loan. An example of a typical type of secured loan is a car loan, used to purchase either a new or pre-loved car. 

Because you are putting up your goods as collateral, these types of loans often come with lower interest rates and fees. According to the Mozo database, the current secured variable rate averages sit at 9.04% (not including car-specific loans) and 7.62% (including car-specific loans). However, it’s important to bear in mind that providers of secured loans are able to seize your assets if you default on your loan.

On the flip side, if you don’t have assets to secure against your loan, or you don’t want to put up your car or home as collateral, you could opt for an unsecured personal loan. You might use this type of loan to fund something like a home renovation or to cover an outstanding medical bill. 

While borrowers aren’t required to risk their assets against the loan, unsecured loans often have higher fees and interest rates attached to them. For example, at the moment the average variable unsecured personal loan rate on the Mozo database is 10.75%

What secured and unsecured personal loans are on the market at the moment? Check out these competitive options below.

Compare secured loans

OurMoneyMarket Car Loan
Promoted
  • Fixed rates from 5.50% (5.58% comparison rate*)
  • No service, exit or early repayment fees
  • Extra repayments allowed

Got your eye on a fresh set of wheels and need a loan to make it happen? OurMoneyMarket’s Car Loan could be what you need. This loan comes with fixed rates starting at a low 5.50% (5.58% comparison rate*) plus has no service, exit or early repayment fees. And while we are on the topic of early repayment, borrowers can make free extra repayments whenever they want. Just remember, there is no redraw facility attached to this loan.

Loans.com.au New Car Loan
Promoted
  • Fixed rates from 4.67% (5.22% comparison rate*)
  • No ongoing fees
  • Free extra repayments

What’s better than a brand new car? A competitive car loan of course! The loans.com.au New Car Loan has both competitive fixed rates starting at 4.67% (5.22% comparison rate*) and no ongoing fees. But that’s not all. Customers can borrow up to $100,000, choose from a weekly, fortnightly or monthly repayment schedule and make extra contributions to their loan. However, there is a hefty $400 application fee and $700 early repayment cost if you pay down your loan before the final year.

Heritage Bank Car Loan
Promoted
  • Fixed rates from 5.99% (6.63% comparison rate*)
  • Extra repayments and redraw facility
  • Borrow up to $100,000

The Heritage Bank Car Loan is competitive in more ways than one. First, let’s talk interest rates: this loan comes with a fixed rate starting at a low 5.99% (6.63% comparison rate*) on loans up to $100,000. Second, let’s talk repayments: not only can borrowers make weekly, fortnightly or monthly repayments, they can also make extra repayments and use the redraw facility if they need to. Just keep in mind fees may apply for customers that pay down their entire loan early.

Compare unsecured loans

Symple Personal Loan
Promoted
  • Variable interest rates from 5.75% (6.47% comparison rate*)
  • Extra repayments allowed
  • No application fee

The Symple Personal Loan is two things: competitive and flexible. Not only does it come with variable rates starting at a low 5.75% (6.47% comparison rate*), there are no application, exit or early repayment fees attached to the loan. Customers can borrow up to $50,000 and choose between a weekly, fortnightly or monthly repayment schedule. Plus, extra repayments are allowed. However, there is no redraw facility.

Alex Personal Loan
Promoted
  • Fixed rates from 6.95% (7.37% comparison rate*)
  • Free extra repayments
  • No ongoing fees

After a competitive personal loan from one of Australia’s brand new online lenders? Meet the Alex Personal Loan. With this loans borrowers will receive a personalised fixed rate, starting from 6.95% (7.37% comparison rate*). Extra repayments are allowed on this loan (at no extra cost) and there are no pesky ongoing fees to worry about either. Just keep in mind there is no redraw facility attached to this loan, and there is an upfront application fee of $295.

NOW FINANCE Unsecured Personal Loan
Promoted
  • Fixed rates from 7.45% (9.07% comparison rate*)
  • Borrow up to $40,000
  • Extra repayments allowed

If you don’t want to put your assets up as collateral and still want a competitive personal loan rate, the NOW FINANCE Unsecured Personal Loan could be the pick for you. With fixed rates starting from a competitive 7.45% (9.07% comparison rate*) if you have a good credit history, you could come home with a great deal. Plus, there are flexible options when it comes to paying off your loan, as you can choose between weekly and fortnightly repayments, and make extra payments as well if you want to. Just keep an eye out for the hefty $495 upfront application fee on this loan.

Want to compare more personal loans? Head over to our secured personal loan or unsecured personal loan comparison tables!

*The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

**Representative example figures and monthly repayment figures are estimates only, based on the advertised rate, mandatory fees, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

Mozo may receive advertising fees from the financial institutions, issuers of financial or credit products and third party advice providers that are shown on this page. These fees are based on a cost per click, cost per acquisition, or a fixed fee.

Polly Fleeting
Polly Fleeting
Money writer

Polly Fleeting is a personal finance writer here at Mozo, specialising in loans and credit cards. Her work is aimed at helping people find ways to make smart product choices, reduce debt and get more for their hard-earned dollars. Polly has a degree in Journalism from the University of Technology, Sydney.