Considering a secured car loan? Our detailed guide explains how secured car loans work and offers tips for how to find the best loan product for your needs.
Looking for extra funds to get behind the wheel of a new car? You may have come across a range of options in your research, including a secured and unsecured car loan from a lender. But what are the main differences?
What is a secured car loan?
As the name suggests, a secured car loan is offered when a bank or lender has security over the asset it is providing a loan for. In this case, the car. If for whatever reason you were unable to repay the loan, the lender would be able to resell your vehicle to recoup the money it loaned you.
There are several key reasons why secured car loans are popular with customers looking to obtain finance on a new car, which we’ll look at in the following sections.
How secured car loans differ from unsecured car loans
Ultimately, the difference between secured and unsecured car loans is whether the bank or lender has security over the car you’re financing. With an unsecured car loan, the lender has no security over the vehicle, and no straightforward way to recover its costs if you cannot make the repayments, which means that it will usually offer lower borrowing limits, higher interest rates, and shorter loan-repayment terms.
Choose a secured car loan if you’re looking to borrow a higher amount, and would like to pay the loan off over an extended period of time. Because your vehicle would be used as security against the loan, lenders may be more lenient on borrowers with lower credit scores, and who have found getting loan approval tough elsewhere.


Advantages of secured car loans
In a word: savings! The main benefit of a secured car loan for you is the ability to borrow higher amounts, and potentially lower interest rates on repayments. Because the bank or lender has security over the vehicle, it may also offer longer repayment terms than with an unsecured car loan.
What are the risks of Secured Car Loans?
he obvious risk to secured car loans is the potential for your vehicle to be repossessed should you not be able to make the loan repayments. However, some other aspects of the loan you need to be aware of are that you need to have full insurance on the vehicle and, depending on the loan repayments, you may end up owing more than what the vehicle is worth at the end of the loan if you opt to make a final balloon payment.
The vehicle’s value at the end of the loan term is dependent on several factors, including its condition and residual value – which is determined by the type of vehicle and its brand reputation, its popularity in the market, and how many examples of the car for sale at the time.

Eligibility criteria for secured car loans
Like any loan or financial product, lenders have an eligibility criteria you must meet in order to access finance for a new car.
To be approved for a loan with Metro Finance, you need to meet the following eligibility criteria:
To find out more about secured car loans offered by Metro, check out https://metrofin.com.au/personal-finance/car-loans/

How to apply for a secured car loan
Think you meet the eligibility criteria and keen to get the ball rolling on your new car purchase? Getting started couldn’t be simpler!
Get in touch with your finance broker, bank lender or Metro broker and they’ll handle the rest. Bear in mind, your broker may ask a range of questions about you, your financial situation and the type of vehicle you’re looking for – they may also ask you to provide a documents to verify your answers and establish your suitability for a loan.
Top tip: Ask lots of questions and don’t be afraid to get a second opinion. It’s also a good idea to discuss any purchases or potential financial arrangements with your accountant first. A Metro broker will be able to guide you through this process, and can support you throughout your finance application – to talk to a Metro broker, click on the ‘Talk to a broker’ button at the top of the page, or click here.
Secured car loan repayment option
There is no one-size-fits-all solution when it comes to secured car loans, as they are tailored to suit you and your needs specifically. However, there are some common elements and options that feature as part of a secured car loan:
01 /
This is paid on top of the purchase amount and forms part of your monthly repayments. Make sure to shop around to get the best rate.
02 /
Some car loans may have penalties if you choose to pay off the loan early, so make sure your check and understand these penalties are, if any, before accepting a loan offer.
03 /
This is a lump sum payable at the end of the loan, which is a way of reducing your monthly loan repayments. At the end of the loan, you can opt to pay the full balloon payment, or apply to further finance the amount.
To find out more about balloon repayments, head to https://metrofin.com.au/news/what-is-balloon-payment-car-loan/
04 /
Loans often attract a number of fees from lenders, and can differ depending on the car loan product. Some fees your secured car loan might include are:
- Application fees: These are charges for processing your car loan application.
- Origination fees: This fee covers the administrative costs of setting up your car loan.
- Documentation fees: These fees are associated with preparing and processing any car loan documents that are required.
- Title and registration fees: These fees cover the cost of transferring the vehicle’s title and registering it in your name.
- Late payment fees: If you fail to make your loan payments on time, you may be subject to late payment fees.
Remember, it’s important to review and understand all terms and conditions for your loan, and any fees associated with it
Tips for choosing the right secured car loans
While the prospect of getting behind the wheel of a new vehicle is exciting, it’s important to do your homework.
Consider the options and the type of loan features that work best for you in terms of the length of the loan, interest rates, fees and whether you’d like to make a final balloon payment. Based on the purchase price of the car you’re interested in and how quickly you’d like to pay off a loan, you may be eligible for an unsecured loan with no collateral on the vehicle, as opposed to a secured loan that uses the vehicle as security.

The biggest thing to consider is your own financial situation, as your loan options will largely depend on your ability to make loan repayments and your credit score.
Some effective ways of improving your credit score might include setting up automatic bill payments to ensure you don’t miss them and reducing the amount you owe.
Talk to your accountant or financial adviser about ways to improve your financial situation if it’s a concern to you. To find out more about the kinds of loans offered by Metro, check out: https://metrofin.com.au/personal-finance/
While there are lots of options available when it comes to financing your new vehicle purchase, secured loans are a great way to get the car you want with a range of flexible options designed to save you money in monthly repayments.
By understanding the differences between secured and unsecured car loans, and some of the main options available to you, you can find a tailor-made option that suits you and your budget.
Remember, it’s always best to first talk to your accountant and broker about the best solution for your needs, and if you’re still unsure, don’t be afraid to get another opinion.
Secured Car Loans - Frequently Asked Questions
Can I used a secured car loan to purchase both new and used vehicles?
Yes. There are many loan options available for both new and used cars. Talk to your own broker or a Metro broker about loan options that might be right for you.
What security is needed for the loan?
With a secured car loan, the asset itself is used to secure the loan.
What if the car I’m looking to buy is mainly for business use?
If your loan will be used predominantly for business, you may be better choosing a Commercial or Novated product.
Metro’s Commercial loans are the best car loans for businesses, providing flexible terms and features to support your commercial vehicle finance requirements. Novated car loans enable employees to finance their vehicles through salary packaging arrangements through their employer.
To find out more about Metro’s business finance products, check out https://metrofin.com.au/business/
What happens if I can’t make the repayments on my secured car loan?
While nobody can predict the future, it’s a good idea to understand the terms of a loan before entering into one, and be confident that you can meet the minimum repayment requirements.
Many lenders also offer support during financial hardship – talk to them if you’re experiencing any difficulties in making loan repayments.
If you’re unsure whether you’ll be able to continue to make repayments for the length of the loan, it’s best to check with your accountant and broker to see if a loan is the right solution for you.
ENDS