Secured Personal Loans
What are Secured Personal Loans
Nowadays you will be able to obtain secured personal loans from most of the major banks, credit unions and building societies in Australia. A Secure Personal Loan is where a bank of finance company lends you an amount of money and in return you provide them with control over an asset that you own as security for the loan. The reason why you would do this (as opposed to taking out an unsecured loan) is so that you appear less risky to the bank and hence receive a lower interest rate on the loan.
You can use any asset that you fully or partially own to secure the personal loan, such as your home, car, land, etc. If you fail to meet the repayments of the loan then the lender will repossess your asset and sell it in order to get their money back. If the sale of your asset does not cover the amount remaining on the loan the you may also have to pay the difference plus and reasonable selling and legal costs.
Common Uses For Secured Personal Loans
What you spend your borrowed money on actually depends on what asset you have used to secure the loan with the lender. If you have used an asset that you already own (ie: house, land, etc) then you can spend the money on what ever takes you fancy. If, however, you have used an asset that you are going to buy (ie: new car, motorbike, etc) then you are forced to spend the money on purchasing that asset. Common uses for secure personal loans can include :
- Buying a car (which is the same as a car loan).
- Buying a caravan, campervan, motor bike or boat.
- Buying furniture and electrical equipment for your home.
- Renovating your home.
- Adding rooms or extending your house.
- Consolidating your high interest debts, such as unsecured personal loans, credit cards, etc.
- Going on an overseas holiday.
- Funding the cost of a wedding.
- Gearing to increase your share portfolio.
- Paying for school fees or university expenses.
Who are Secure Personal Loans Suitable For
If you have an asset that you own outright, like a car, or one that you have some equity in, like your home, and and you require access to more money in a hurry then a secured personal loan is suitable for you. One of the major benefits of personal loans is that there are limited requirements in the approval process, which means that they don't take long to obtain.
When you have a good credit history and stable employment applying for a secure personal loan is relatively easy and it is generally approved within a few days. Detailed below are some of the categories of people for whom obtaining personal loans is much more difficult. Don't dispair if you fall into one of these categories, however, because there are a number of things that you can do to increase the chance of your application being successful.
Secured Personal Loans With Bad Credit
It can be quite a time consuming and frustating task trying to get secured personal loans for people with bad credit. If you have made poor credit choices in the past then these mistakes can affect your borrowing capacity for some time, but there are options that are available to you. If you have some equity in an asset like your house then you shouldn't have too much trouble obtaining a secured personal loan, however you will probably have to pay a slightly higher interest rate than someone with a good credit history and there may even be certain restrictions on the loan.
A very important point to make is that if for any reason you are not sure about your ability to repay a secure personal loan, then you should seriously reconsider taking out the loan. You have to be fairly certain that you will not default on this loan, because if you do it can be disasterous for you. Not only will you ruin your credit rating further but the lender will also reposses the asset that you secured the loan with, and if that was your house then you may be left with no place to live.
Bad credit is a bit of a cycle that many people feel that they can't get out of, but there are a few things that you can do to try and repair your credit rating. Firstly get a copy of your credit history and try to correct any mistakes that are on there. Secondly get help from an independant councelling service to pay off the debts that are currently on your credit report. By doing these two things you will be able to fix your credit rating and the cost of getting a loan in the future will be much less.
Secured Personal Loans For Retired People
In general senior citizens and retired people experience much greater difficulty in obtaining loans. However, one of the best things that you can do when applying for a personal loan, regardless of your age, is to prove that you can make the loan repayments. If the bank lender believes that you can service the loan then you will be classified as a low risk customer and your application will be successful.
Another important piece of information that may help you get a secured personal loan if you are retired is to highlight that fact that you are a home owner. To the bank this means that you can use your property to secure the loan and are even able to access funds or equity from property to meet the repayment amounts.
Secured Personal Loans For Self Employed
According to the banks people who are self employed are a much bigger risk simply because they cannot prove exactly how much they earn on a regular basis. If you have ever tried applying for a self employed personal loan from a bank then you will know the frustration, but there are options available to you.
Self-employed people should look to the range of low doc and no doc loan that are available on the market today. The majority of these are provided by the smaller lenders, but they provide a great wat to get funds without having to produce income documentation and tas returns. These types of loans are ideal for self employed and pay-as-you-go (PAYG) applicants who have lots of assets and need money for personal, investment or business purposes.
If you are unsure about the meaning of some of the terms or abbreviations used by lenders then you can check out the personal loan terminology page, which has a detailed explaination about some of the more confusing aspects of getting a secured personal loan.
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