Secured vs unsecured personal loans: what's the difference?

Last updated 3 November 2026 · Reviewed by 360 Asset Finance Compliance

What is a secured personal loan?

A secured loan is linked to an asset. For a personal loan, that's usually the vehicle or other item the loan pays for, such as a car, ute, van, motorbike, boat or caravan. The lender records its interest in the asset, typically on the Personal Property Securities Register (PPSR), until the loan is repaid.

While the loan is secured, the asset is still yours to use, but there are usually conditions. For example, the lender may ask you to keep it insured and in good condition, and you may need to repay the loan before you sell it.

What is an unsecured personal loan?

An unsecured loan isn't linked to any asset. The lender relies on your income, your financial situation and your history of repaying credit. Unsecured loans are often used for things that can't easily be used as security, such as:

• consolidating existing debts into one loan with one repayment
• a holiday, spread over regular repayments
• smaller home improvements and repairs
• medical, dental and other health costs.

What happens if I can't make the repayments?

With either type, missed repayments can lead to extra fees and interest, and can be recorded on your credit report. The difference is what the lender can do next:

• Secured loan: the lender can take and sell the asset to recover what's owed. If the sale doesn't cover the debt, you may still owe the rest.
• Unsecured loan: there's no asset to take, but the lender can still take recovery action, which can include legal action.

If you're finding it hard to keep up, contact your lender as early as you can. You can ask for help under its hardship arrangements, and free, confidential help is available from financial counsellors through the National Debt Helpline.

Why might the cost be different?

Because a secured loan gives the lender an asset to fall back on, the lender's risk is different, and that can be reflected in the interest rate and fees. That doesn't mean one type is always cheaper. Pricing depends on the lender, the loan and your situation.

When you compare, look past the repayment amount to the interest rate, upfront and ongoing fees, the loan term and the total amount you'll repay over the life of the loan. We explain the rate, fees and total cost before you decide, so you know what you're committing to.

Which one should I look at?

It depends on what the loan is for and your situation. A few questions can help you think it through:

• Is the loan paying for an asset, such as a vehicle, that could be used as security?
• Are you comfortable with the lender having a claim on that asset until the loan is repaid?
• Do you want flexibility to sell or change the asset during the loan?
• Which option has the lower total cost once fees are included?

Your broker can show you which types are available for what you need, and how they compare.

What checks does the broker do?

Personal loans are regulated credit, so responsible lending rules apply whether the loan is secured or unsecured. We ask about your goals, income and expenses, and check that any loan we suggest meets your needs and that you can afford the repayments. We won't suggest a loan that doesn't meet your needs or that you can't afford to repay. The lender will then assess your application against its criteria and decide whether to approve it.

FAQs

General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. Finance is provided by the lender you choose and is subject to its lending criteria; fees and charges apply. 360 Asset Finance is a trading name of Kuone Consulting Pty Ltd (ABN 75 647 329 002), Australian Credit Licence 566705.