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Buying a car

What’s the difference between a secured and unsecured car loan?

23 May 2019

A personal loan can help you take the next step if you don’t have the cash handy to buy a car outright. If you’ve looked into a car loan, you’ve probaby come across ‘secured’ and ‘unsecured’ car loans. So what do they mean, and which will work best for you and your dream car? 

What is a secured loan?

When you purchase an asset like a car, a secured loan takes this asset’s worth as security. This means that if you couldn’t repay the loan, your lender would be able to sell your asset to recoup their money. 

A secured loan generally makes it less risky for the lender, which means you may be able to access a lower interest rate than you would with other loan types. As with any loan type, it’s worth checking the interest rate and calculating your loan repayments to avoid any surprises.   

Suncorp can help you get an estimate of how much your car loan could be based on your loan amount. 

If you’re buying a car that’s less than seven years old and the market value of the car is at least $7,500, you may be eligible for a secured car loan to help you get out on the road for less. Secured car loans come with a fixed interest rate, meaning that you’ll always know how much your payments are.  

Discover Suncorp Secured Car Loans

What is an unsecured loan?

If you take out an unsecured loan, you don’t have to put up an asset as security. However, since the lender may be taking on more risk, the interest rate could be higher than it would be for a secured loan. A personal loan for any other beneficial purpose including purchasing a vehicle more than 7 years old or worth less than $7,500, is considered an unsecured loan.   

The good news is that, if you’re applying for a Suncorp unsecured loan, you can apply for a Fixed or Variable interest rate. So you can choose between the certainty of fixed repayments and the flexibility of variable repayments, depending on your circumstances. 

How do I choose? 

There are a few questions you’ll want to ask when choosing a loan, such as:  

  • What’s the interest rate like?
  • Do you prefer a fixed or variable rate? 
  • What’s the length of the loan?
  • Can you realistically pay it back in a shorter timeframe? 
  • What vehicle are you buying? 

The price of your car should be a real factor in your decision to take out a loan. For example, if you’ve gone for an upmarket car, then you’ll have to borrow more. This will affect things like how long it takes to repay the loan, and the interest that’ll accumulate. 

The fees and charges of a personal loan  

Here’s a quick run down of the fees and charges commonly associated with Suncorp personal loans: 

  • Interest rate.     
    • The exact rate will depend on whether you’ve opted for a secured loan or an unsecured (fixed or variable) loan. 
  • Establishment fees. 
    • Setting up the loan and any applicable Personal Property Securities Register Registration fee. This let’s you check whether you’re buying property that has a security interest attached to it. 
  • Ongoing fees. 
    • Your monthly account keeping fees. You’ll need to consider things like the monthly payments as there can be admin fees each month, which may increase your costs. 
  • Early payout fee. 
    • Often payable on the day the loan is paid out. 
  • Default charges. 
    • In the event of a default payment, this might include an arrears administration fee or default interest. 

Explore our Fixed and Variable rate pages to see what fees apply to a Suncorp loan. 

Buying a used car anytime soon?   

This is just a hunch, but if you’re considering buying a car and you’ve decided to take out a car loan, you won’t want to waste a second more than you need to. But before you drive away, it’s important to weigh up the extra costs, like car insurance, plus additional up front costs such as getting spare keys cut or a quick pre-purchase check-up from your mechanic. 

When buying any car you’ll need to set a budget. This budget should factor in what fees, regulations and transfer requirements apply in your state. A good way to get started is to prepare a used car buying checklist so you can quickly find your perfect car, rather than spending your time chasing and inspecting cars without having done the proper planning.  

Luckily, we’ve done the work for you! Suncorp has prepared every step of your used car buying journey from start to finish. 

Discover The Used Car Buying Checklist

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Insurance is issued by AAI Limited ABN 48 005 297 807 trading as Suncorp Insurance. Consider the Product Disclosure Statement before making a decision about this insurance. This advice has been prepared without taking into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it.

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