In Australia, personal loans have been on the rise, especially since the advent of the COVID-19 pandemic. And secured personal loans are a type of personal loan that people can borrow as long as they can show or submit proof of collateral as security. Bankers often ask for security in the form of collateral in the country for large loans or when the borrower doesn’t have good credit scores to draw an unsecured loan. Secured loans can be drawn by those who have low credit scores as long as they can back them using any of the financial assets that the borrower owns. This can be a vehicle, a house or any other minor or major asset that can be used as payment if the borrower defaults on the loan.
Personal loans have been one of the most common loans taken by citizens in the country, and the demand for them is skyrocketing during the pandemic. The average amount of personal loans taken in Australia is somewhere between 15,000 dollars and 16,000 dollars, with larger amounts requiring collateral or higher credit scores. Besides, secured personal loans can be backed by different types of assets and financial instruments, such as:
- Real estate is one of the typical instruments used as collateral in a secured loan. It also includes any financial equity a customer has after purchasing the property.
- All bank accounts, including checking accounts, saving accounts, and even other certificates of deposits, are accepted.
- Vehicles that are under the customer’s name like motorcycles, cars, trucks and even boats or RVs.
- Commodities, precious metals and other valuables.
- Mutual funds, stocks and other investments.
Benefits of Taking a Secured Personal Loan
- Since they already have proof of collateral from the borrower, these loan types are very low risk; hence, it is not much of a threat to the lender. As a result, lenders can offer the lowest interest rates possible. And due to the less risk involved, a secured loan is way easier to obtain in Australia, and even those with lower credit scores apply for a secured loan.
- Borrowers who have issues with money or are under tight budget constraints can apply for secured loans as long as they have an asset or security to put down. Since the interest rates are lower and lenders are more lenient regarding these types of loans, borrowers can take them without stressing about repaying large amounts monthly.
- Secured loans allow borrowers to take a considerable amount for their utilities compared to unsecured loans that only allow customers to borrow a small amount. Hence, secured loans offer borrowers a lot of financial options which are otherwise limited in the case of other loans.
- Customers can get a secured loan approved in no time and with less hassle of paperwork and documentation. The ease of approval can also be attributed to the less risk involved when it comes to the lender.
- A borrower also has multiple payment options when it comes to secured loans—EMIs, post-dated cheques, and even earlier repayment than the time designated if they have more money.
- A secured loan can also help boost credit scores, especially for those with low credit scores. Since secured loans are less risky with affordable interests, paying off these loans in time can help boost the credit score of the customers or the borrowers. What’s more interesting is that secured loans don’t have any income criteria that borrowers need to fulfil, as is the case for many other loans.