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Secured Loans

With the fallout of the global economic crisis continuing to affect countries around the world, it’s inevitable for many people to reach a point when they experience financial difficulties. There are bound to be times when the expenses are more than the income being received. When this happens, what options are available to you?

One common solution to this problem is to approach a lender to apply for a loan. Banks and financial institutions in Australia offer a wide array of loan facilities which are individually designed and formulated to help address financial difficulties. And, depending on your personal circumstances and financial history, you may be able to obtain the loan you require easily.

One way to improve your prospects of obtaining a loan from a credit provider in Australia is to apply for a secured loan. This type of loan provides an excellent means of increasing the chance of your loan application being approved as it gives the lender some collateral that backs up your promise to pay.

A secured loan is a loan facility offered by many banks and non-bank lenders where a borrower is required to provide something as collateral for the loan. That thing is the security. Depending on the type of loan the security can be just about anything: a house, investment property, car, term deposit, jewellery, shares, business inventory or equipment. What is acceptable security (and what is allowable under the law) depends on the particular loan facility in question.

As the lenders are putting out an investment on you through the money they will provide you access with, they need to have some sort of assurance that their investment will be returned in full, with interest, in the event the borrower defaults on the agreed repayments. Without holding some security, they would have to resort to the legal system in order to recoup their investment in the event of default and run the risk of a borrower declaring bankruptcy which could wipe the debt completely.

With a secured loan, you will be motivated to make timely repayments on the borrowed money because you don’t want to risk losing the security you gave. If the borrower has given security for the loan, the lender can repossess and sell that collateral to pay off the unpaid loan amount and expenses incurred in the process. This way, the lenders have reduced their risks and are able to recoup their investment. In many cases, the security will also survive bankruptcy proceedings.

If you used your car as loan collateral, would you risk losing it to the bank because you failed to fulfil your loan repayment obligations?

This reduced risk often translates into lower interest rates and charges for the borrower – which is why many lenders have a lower interest rate for secured loans.