Is It Possible to Get Secured Loans with Bad Credit in Australia?
Secured loans for bad credit are an interesting innovation in the financial market. Over the years, banks and other traditional financial institutions have given record amounts of loans, but only to people who have strong credit scores.
With secured loans for bad credit, people with bad credit still have the opportunity to get the loans they need to finance emergencies. Instead of focusing on your credit score, these lenders care only about your collateral. Your asset collateral lowers the risk for the lender, which lets you make up for your low credit score.
If you ever need an emergency loan and have something of value, then you might want to consider this loan option.
What's the Difference between Secured and Unsecured Loans?
One of the most important aspects of loans is distinguishing between secured and unsecured loans.
Generally, a secured loan is a type of loan that will require an asset to serve as security for it. It could be a car, a boat, a house, jewellery, or some other form of property. These loans are advantageous because they usually come with low interest rates because lenders are more secured thanks to the collateral.
On the flip side, an unsecured loan is one that doesn't require any collateral. These loans are riskier for lenders, so they come with higher interest rates. However, when you're unable to pay the loan back, you don't run the risk of losing any of your property.
What Assets Can You Put up as Collateral for a Secured Loan?
Generally, you can use different physical items as collateral when it comes to secured loans. These range from your house and car to things like jewellery and other valuable items.
Whatever it is, you should keep in mind that the value of the loan will most likely not be more than the value of the collateral you put up. So, if you'd like to borrow up to $10,000 via an unsecured loan, you need to make sure that the asset you're giving up as collateral is also worth up to that amount. Otherwise, your chances of getting approval are slim.
What Are the Benefits of Bad Credit Secured Loans?
Bad credit secured loans are among the most popular in the market. They are especially advantageous for the following reasons:
- Your credit score doesn't matter: Basically, these lenders care more about the security and your ability to pay back than your credit history. So, your credit score doesn't matter as much.
- Low interest rates: Default will be much less of a threat to the lender because of the collateral. So you'll likely be charged lower interest rates than other types of bad credit loans.
- A way to build credit: The more you're able to pay back your secured loan, the more you can grow your credit score. In the long run, this helps your financial strength significantly.
- Debt consolidation tool: If you're thinking of getting a loan for debt consolidation, finding a secured loan is a much easier and cheaper option than an unsecured one.
What Types of Secured Loans for Bad Credit Can You Obtain in Australia?
In Australia, bad credit secured loans come in different types, including but not limited to:
- Car Loans: Secured bad credit loans are an ideal option for anyone looking to get a new car. You can use the car to secure the loan, then get a lower lending rate from the lender as well.
- Home Equity Loans: If you already have equity in your home, then you can use it as collateral for a loan.
- Secured personal Loans: A secured personal loan is similar to the other two types of loans listed above since you can buy a property and use it as security. But, you can also use an existing item as collateral too.
How Do You Take out a Secured Loan with Bad Credit?
Here's how to apply for a bad credit secured loan in Australia:
- Examine the different loan providers and their offerings. Compare fees, features, and rates.
- Ensure that your income, credit, and employment standings are in line with the lender's requirements.
- Find how much you'll need to repay monthly and see if it fits your budget.
- Submit your application form. Remember to put in all relevant details.
- Accept the terms and conditions, and the funds will be sent into your bank account.
Can You Get No Credit Check Secured Loans?
As explained earlier, it is possible for you to get a secured loan. As long as you have an item that you can use as collateral, you shouldn't have much of a problem getting the loan.
However, lenders still need to ascertain your creditworthiness when you apply for a loan. And in more cases than one, they will need to do so by running a credit check.
So, a lender offering a "no credit check loan" might actually be a red flag that you should keep an eye out for. Lenders will have to check your credit history, but there's no need to worry as most times this is a soft credit check that won't further lower your credit score.
Things to Pay Attention to Before Applying for a Secured Loan for Bad Credit
When you get different loan offers from different lenders, it is important to make the right choice. Here are a few things to keep in mind:
- The Collateral: Some lenders will make specific collateral requests, while others won't. Whatever the case, be sure you're set on that front.
- Your Budget: You should also borrow only according to your budget.
- Interest Rates: You can group lenders based on the interest rates, so you choose whichever lender offers the lowest rates available.
- Payment Schedules: You should also examine the payment schedules to know if you'd be comfortable meeting up with the obligation.
- Loan Terms: You should consider the tenure of the loan. Short terms will require higher repayments, but they also cost less over time. Loner terms come with lower repayments, but they result in higher interest costs in the long run.