When you borrow money, you'll often hear the words "secured" and "unsecured".
The difference is simple, but it affects your interest rate, how much you can borrow, and what's at stake if things go wrong.
Here's what each one means, which usually costs less, and how to work out which suits you.
Last updated November 2026.
The difference: a secured loan is backed by something you own, usually a vehicle. An unsecured loan isn't.
Cost: secured loans often come with a lower interest rate, because there's less risk for the lender.
Larger amounts: security can help you borrow more.
If you can't keep up: talk to your lender early, because there's usually a way through. With a secured loan, repossession is a last resort, and only possible after a formal legal process that includes written notice and time to catch up.
Unsecured loans: no asset is at risk, but rates are often higher and limits can be lower.
With Instant Finance: we offer both. Smaller loans are often unsecured, and larger loans may need security.
A secured loan is backed by something you own, called security or collateral. With a personal loan, that's usually a vehicle, like a car or motorbike.
If repayments can't be sorted out, the security gives the lender a way to recover what's owed, but only as a last resort, after a formal legal process.
An unsecured loan isn't backed by anything you own. The lender decides based on your income, your expenses and your credit history.
An example: say you're borrowing $10,000 and own a car worth $12,000. Offering the car as security could help you get a lower rate. If you're borrowing $2,000 for a dental bill and don't want to tie it to your car, an unsecured loan might suit you better, usually at a slightly higher rate.
|
Secured Loan |
Unsecured Loan |
|
|
What backs it |
Something you own, usually a vehicle |
Nothing. It's based on your income, expenses and credit history |
|
Interest rate |
Often Lower |
Often Higher |
|
How much you can borrow |
Security can help with larger amounts |
Limits can be lower |
|
What you'll need |
Details of the asset, proof you own it, and insurance on it |
Proof of income and your bank statements |
|
If you can't keep up |
Your lender will work with you first. Repossession is a last resort, only after a formal legal process including written notice and time to catch up |
No asset at risk, but your credit file can be affected, and the lender can take other steps to recover the debt |
| Common examples | Car loans secured against the car, hire purchase, mortgages and mortgage top-ups | Most smaller personal loans, credit cards, overdrafts, Buy Now Pay Later, student loans |
Usually, yes. Security lowers the lender's risk, so a secured loan often comes with a lower interest rate.
It's the same with us: offering security can bring your rate down, and for larger amounts it can be what makes the loan possible.
But the rate isn't the whole story. A longer term or higher fees can mean you pay more in total, even at a lower rate, so compare the total amount you'll repay, not just the rate.
Our loan calculator shows how the term changes your repayments.
The asset is part of the deal. If repayments genuinely can't be sorted out, repossession is a last resort, and only after a formal legal process (see below).
More paperwork. You'll need proof you own the asset, its value, and insurance on it.
Selling it is harder. You'll usually need to repay the loan, or swap in other security, before you can sell. See selling a financed car.
A registration fee may apply. Lenders register their interest in the asset on the Personal Property Securities Register (PPSR), and there's usually a fee for this. See our rates and fees.
Higher rates, because the lender takes on more risk.
Lower limits, in some cases.
More weight on your income and credit history, because there's no asset involved.
Missed payments still have consequences: default fees and interest, a mark on your credit file, and possible debt collection.
A secured loan may suit you if:
you're borrowing a larger amount;
you own a vehicle you're comfortable using as security;
you'd like the chance of a lower rate;
you're buying a vehicle and the loan can be secured against it.
An unsecured loan may suit you if:
you're borrowing a smaller amount;
you don't have an asset to offer, or don't want to tie one to the loan;
you rely on your car for work and would rather not tie it to a loan.
Buying a car? See car loan vs personal loan and how much you can borrow for a car.
Renovating? See personal loan vs mortgage top-up.
If your credit history isn't perfect, you may still have options either way.
Offering security can sometimes help, because it lowers the lender's risk.
Unsecured loans are possible too: a default or a mark on your credit file isn't an automatic no with us, because we look at your whole situation now.
No responsible lender can guarantee approval, secured or unsecured, because every lender has to check you can afford the repayments.
For more, see bad credit loans, our guide to getting a loan with bad credit, and bad credit car loans.
We offer both secured loans and unsecured loans.
Whether your loan needs security depends on your situation, how much you're borrowing and what you can afford.
Loans from $500 to $50,000, with personalised fixed rates from 9.95% to 29.95% p.a., over 3 months to 7 years.
Smaller loans are often unsecured. Our Fast $500 is always unsecured.
Security is usually a vehicle, like a car or motorbike. You'll need details of the vehicle and its insurance.
We register our interest on the PPSR. It's removed once your loan is repaid.
Using the car you're buying: a car loan can be secured against the car itself.
Ready to look at a secured loan? See our secured loans page.
We won't let you get in over your head: we'll go through your budget with you to make sure the repayments fit. Find out more about responsible lending.
Repossession is a last resort for any responsible lender.
Long before it's ever considered, a lender will try to work something out with you.
That could mean adjusting your repayments, extending the term or pausing payments for a while. You can also formally ask for a change to your loan if illness, job loss or another reasonable cause makes repayments hard.
The most important step is to talk to your lender early, ideally before you miss a payment.
Our guide to managing your loan repayments explains your options.
If it ever got to that point, the law also sets a formal process that a lender must follow before anything can be repossessed:
A written warning first. The lender must give you a repossession warning notice at least 15 days before repossessing.
Time to put it right. If the problem can be fixed, for example by catching up on missed payments, you get at least 15 days to do so.
Notice after repossession. If goods are repossessed, you must be told what happens next, including how much you owe and your options, before they're sold.
If you're unhappy with how a lender has treated you, you can complain for free through its dispute resolution scheme. Ours is the IFSO.
It depends on your situation. A secured loan often has a lower rate and can help with larger amounts, but the asset is part of the deal if repayments can't be sorted out. An unsecured loan doesn't involve an asset, but rates are often higher. For smaller amounts, unsecured is often simpler.
Usually, yes, because security lowers the lender's risk, which often means a lower interest rate. But compare the total you'll repay, including fees and the length of the term, not just the rate.
The asset is part of the deal: if repayments genuinely can't be sorted out, repossession is a last resort, after a formal legal process. You'll also need proof you own the asset and insurance on it, a registration fee may apply, and you'll usually need to clear the loan before selling it.
Possibly. A default or a past credit problem isn't an automatic no with Instant Finance, because we look at your whole situation now. Offering security can sometimes help, but no responsible lender can guarantee approval.
For personal loans, security is usually a vehicle, like a car or motorbike. The lender registers its interest on the Personal Property Securities Register, and you'll need to show you own the vehicle and that it's insured.
No. Repossession is a last resort, and before it can happen a lender must follow a formal legal process. That includes giving you a written warning at least 15 days beforehand and time to catch up. Long before that, a responsible lender will try to work something out with you, so talk to your lender as early as you can.
