If you’ve been looking around for a personal loan, you may have noticed that there are both secured and unsecured loans. Typically these two types of loans have different interest rates.
So, what is the difference between the two and how does it impact the interest rate?
Unsecured personal loans
An unsecured loan means that you don’t have to provide any security for your loan. You can use an unsecured loan for a range of purposes such as taking a holiday or making some improvements to your home.
While the interest rate on an unsecured personal loan is usually higher than a secured loan, it also offers a little more flexibility and a quicker and easier application and funding process, since you won’t need to provide us with details of the asset you’re using as security (e.g. a car).
Secured personal loans
A secured personal loan is a loan guaranteed by an asset, such as a car. The lender uses this asset as security, which means that if you don’t make the agreed repayments the lender can take possession of the asset and sell it to cover the cost of the loan. This security means that the lender can offer a lower interest rate for the loan.
A secured loan is generally only available on vehicles less than five years old, as the lender needs to be confident of its value. You’ll also need to provide details of the vehicle when you purchase so that the value can be verified.
Applying for a CommBank Secured Car Loan
To be eligible for a CommBank Secured Car Loan, you’ll need to be:
- Buying a car that isn’t more than five years old
- Using the full loan amount to purchase the car (not refinancing an existing loan or financing insurance premiums and other costs associated with owning a car)
- Buying a car that is not currently financed
- Buying a suitable vehicle – you can’t use our Secured Car Loan to buy a caravan, motorbike, commercial vehicle or truck
- Looking for a loan of $10,000 or more
- Wanting a loan with a term of less than five years.
You’ll need to provide documents including:
- A 12-month comprehensive car insurance policy document to show you have car insurance; you’ll need to specify the Commonwealth Bank as the financier of the car when you take out the insurance.
- A tax invoice that includes the car registration number, vehicle id (VIN) or chassis number, engine number and purchase price of the car.
These forms can help you collect the information you will need: