car loans and personal loans - key differences
08 November 2010
One of the first decisions you'll need to make when taking out a car loan is deciding whether to apply for a secured car loan or a personal loan. While some lenders may be more willing to approve a loan that is asset backed, both types have their advantages and can help you get what you want, quickly.
What is a secured car loan?
A secured car loan is a loan that has an asset against it, something you own that you can use as collateral until the loan is paid off in full. If, for some reason, you can't pay off your loan the bank will take possession of the items you put up as security to recoup some of the money you owe.
If you're looking for car financing, a secured car loan is the best option. Generally you can use your new car as collateral, regardless of its age. It just needs to be valued at over $10,000. A secured car loan means your monthly repayments are lower because the interest rate is lower.
Secured personal loans aren't just for purchasing new cars though. In fact you can use your motor vehicle as security for a range of different loan purposes including:
- major home renovations
- buying a new boat
- taking a long overdue holiday
Personal loans are generally unsecured and are a little riskier for the lender. These loans are not guaranteed by objects put up as collateral, they're just guaranteed by a signature and your promise that you'll re-pay the loan in full. Because there is no security for the lender, personal loans are subject to a higher rate of interest. If you don't own anything to offer the bank as security - like a car or property, an unsecured personal loan may suit you.
The good thing is you can use a personal loan for a range of different things like:
- buying a car
- debt consolidation
- home improvement projects
- paying off student debt
A Bankwest personal loan is perfect for borrowing small amounts over a shorter loan term. If you'd like to get an idea of what your repayments could be, use our handy online calculator. You can also check out the current personal loan interest rate.
How secured car loans and personal loans are different
While both loans help you to get what you want, now, there are several key differences that you should be aware of.
- A secured car loan has a lower fixed rate of interest.
- A secured car loan has lower monthly repayments, which means you can pay off your loan faster.
- There is the possibility of borrowing a greater amount of money with a secured car loan.
If you're in the market to buy a new or used car, deciding what type of loan to apply for will be one of the first decisions you need to make. While both loan types have their advantages, a secured car loan will end up saving you money in the long run.
Important things you should know:
For the Bankwest Car Loan, lending criteria, fees and charges apply. Terms and conditions apply and are available on request.