Secured vs Unsecured Loans: What Is the Difference?

A secured loan is backed by something you own, usually your car, which the lender can take if you don't repay. An unsecured loan isn't backed by anything, so the lender relies on your income and credit history instead. Secured loans often cost less, while unsecured loans put none of your belongings at risk.

Secured vs unsecured loans at a glance

• What backs it: Secured loan: An asset, usually a car. Unsecured loan: Your income and credit history.
• Cost: Secured loan: Often a lower rate, because the lender's risk is lower. Unsecured loan: Often a higher rate.
• Risk to you: Secured loan: The lender can repossess the asset if you default. Unsecured loan: No asset at risk, though missed payments still hurt your credit.
• Approval: Secured loan: Can suit people with lower scores who have a suitable asset. Unsecured loan: Depends more on income and credit history.
• Speed: Secured loan: Can take longer, as the asset is checked and registered. Unsecured loan: Often faster, with no asset to check.
• Paperwork: Secured loan: Asset details, and the loan is registered on the PPSR. Unsecured loan: Usually just ID, income and bank statements.

What is a secured loan?

A secured loan uses an asset as security. For personal loans, that's usually a car. The lender registers its interest on the Personal Property Securities Register (PPSR), so the car can't be sold without the loan being paid out first.

You keep using the car as normal. But if you can't make the repayments and don't reach an arrangement, the lender can repossess it and sell it to recover the debt.

What is an unsecured loan?

An unsecured loan isn't tied to any asset. The lender decides based on your income, expenses, bank statements and credit history. If you fall behind, they can't take your belongings, but they can charge default fees, report missed payments and take recovery action.

Jingle's small and short-term loans are unsecured, so you don't need to put your car up as security.

When a secured loan can make sense

• You need a larger amount and want to keep the cost down
• You have a car that's worth enough to use as security
• You're confident you can make every repayment

When an unsecured loan can make sense

• You need a smaller amount, for a one-off cost
• You don't own a suitable asset, or don't want to risk it
• You want a simpler, faster application

Questions to ask before you choose

1. What's the total cost? Compare the comparison rate and the total repayable, not just the interest rate.
2. What happens if I miss a payment? Ask about fees, hardship help and, for secured loans, when repossession could happen.
3. Are there early repayment fees? Some lenders charge them. Jingle doesn't.
4. Can I comfortably afford the repayments? Rent, bills and groceries come first.

Our loan fees guide explains comparison rates and the legal caps on fees.

Frequently asked questions

What is a secured loan?

A loan backed by an asset, usually a car. If you don't repay, the lender can repossess and sell the asset.

What is an unsecured personal loan?

A loan that isn't backed by any asset. The lender relies on your income and credit history.

Is a secured or unsecured loan easier to get?

A secured loan can be easier if you have a suitable asset, because the lender's risk is lower. Every application is still assessed on whether you can afford the repayments.

Are unsecured loans more expensive?

Often, yes, because the lender takes on more risk. Always compare the comparison rate and the total amount you'll repay.

Can a secured loan affect my car?

You keep driving it, but the lender's interest is registered on the PPSR. If you default and don't reach an arrangement, the lender can repossess it.