In secured loans, the borrower is required to provide collateral to get the money. And the most famous examples of secured personal loans are home loans and automobile loans. In these loans, the borrower is obliged to provide the vehicle or property they intend to buy as collateral, while it is the lender’s right to confiscate the collateral/secured debt if the borrower fails to pay back the loan on time.
Obtaining a large amount of money is easier and more secure with a secured loan in Australia. Meanwhile, a non-recourse loan in Australia is a form of secured loan that protects the buyer in default. In this, the bank has no additional right to demand anything from the borrower other than the collateral put up as security.
How Are Personal Loans Funded?
Once your application for a secured personal loan has been granted, a lump amount of money will be sent directly into your bank account. Meanwhile, depending on the lender, the transfer might take as short as 24 hours or as long as a few weeks. And once the loan has been issued, you’ll be required to begin making monthly instalments. Besides, your monthly payment will never change if you take out a personal loan with fixed interest rates.
Regardless of the objective of your loan, you’ll undoubtedly have several alternatives to choose from. As such, financing is accessible via credit cards, home equity loans and more. And if you fail to repay unsecured loans, your house, car, or savings account aren’t immediately in danger. Personal loans, on the other hand, might be an excellent option for many individuals.
Compared to home equity loans or HELOCs in Australia, personal loans are less costly than credit cards and quickly provide financing. In addition, Australian personal loans are less hazardous than secured loans like home equity lines of credit since no collateral is required.
Advantages of Securing Your Loan in Australia
The advantages of securing a loan much outweigh the disadvantages of unsecured borrowing. So, using a secured personal loan, you can:
- Since the bank can depend on your intention to preserve your collateral, interest rates are lower. And for a lower interest rate, banks will lend to you if they feel that their investment in you is safe, and this results in simpler payments and less impact on your budget in the long run.
- The bank’s obligation and risk are much decreased, and thus these institutions will be willing to lend more money. Because of this, the bank will only authorise loans with collateral values that are near to or equal to the value of your assets.
- The bank offers better terms and conditions that don’t leave you in the lurch if things go wrong, more accessible and cheaper processing (often free), and speedier paperwork and approval.
- Because of the flexible repayment terms, you don’t have to worry about penalties and charges on settlement payments, pre-closing your loan, making one big payment that significantly reduces your capital (if you’ve suddenly got some money), or even whether to close your loan early or even if you want to extend your loan tenure. Furthermore, you may cancel your debts early with certain banks and lenders, but this isn’t always the case with secured loans.
- You can have a repayment plan that may be tailored to fit your financial situation. And it’s your choice whether you want to pay off your debt in a short period or take your time. As such, for as long as the collateral asset is yours, you may make the decision.
- Good credit history might be taken advantage of since it is an indication that shows your capacity to repay a debt. Meanwhile, your ability to repay your loan is no longer necessary when you include an asset as collateral in the calculation.
- Since interest is tax-deductible, more money is saved from being taxed.
- It is much easier to qualify for an unsecured loan if you have a steady source of income. Meanwhile, in a secured loan, since you’ve already pledged a valuable item as security, your capacity to repay is irrelevant.