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What is a secured car loan?

If you’ve got your eye on a new car and you just need some extra funds to get behind the wheel, you’ve probably started looking at car loans. And that means you may have come across the terms ‘secured loan’ and ‘unsecured loan’. So what’s the difference and what does it mean for you?

Secured loans: more security for the bank, a lower rate for you

A secured loan is when the bank has security over the asset in question – in this case, your new car. This means if something were to happen and you couldn’t repay the loan, the bank would be able to sell your car to recoup its money. What’s the advantage for you? Security makes a loan less risky for the lender, which means you might be able to get a lower interest rate than other loan types.

On the other hand, with an unsecured loan, the bank doesn’t have any security over your property. This makes it a more risky loan for the lender, which means you may be charged a higher rate.

Why a secured car loan could be the way to go

The car loans offered by most banks are often secured loans. They’re typically set up to let you borrow higher amounts – say up to $100,000 – while unsecured loans are often reserved for smaller amounts of up to $50,000.

You can use a Westpac Unsecured Personal Loan, Flexi Loan or Car Loan to buy a car, but there are reasons you might prefer the third option. As a car is often a substantial purchase, the lower rate of a secured car loan can save you interest, which helps you pay a lower total loan cost. Plus, the interest rate is fixed rather than a variable interest rate – this makes it easier to budget for your repayments, as they always stay the same.

Before you get started

Before choosing any loan, you might want to think about how you’ll factor it into your budget for the life of the loan. This includes working out the total cost, knowing what happens if you fall behind in your repayments and being aware of any fees you’ll be charged if you pay out your loan early.

Want to learn more? Learn how much you could borrow with a car loan or use our car loan calculator  to see what repayments could look like.

Alternatively, take a look at the rates and features on the Westpac Car Loan.

Things you should know

Personal Loan Contract Terms and Conditions (PDF 394KB) - for customers approved before 18 March 2024.
Personal Loan Contract Terms and Conditions (PDF 210KB) - ​for customers who apply, or are approved, on or after 18 March 2024.​

Credit criteria, fees, charges, terms and conditions apply.
Normal lending criteria and car security guidelines need to be met for loan approval.