Secured Finance: Beneficial to Lender & Borrower

Information verified correct on October 21st, 2016

A secured debt is a loan given to a person against the security of a certain asset.

This asset can be a movable asset such as a car, or immovable assets such as land, and real estate. If the person who has taken a loan defaults on repayment of the loan, the creditor has the right to claim your ‘collateral’, or property you’ve pledged for the secure finance.

The general opinion in the market is that a secured debt is beneficial only to the creditor because if the borrower defaults on payment they can always sell the asset and recover the money. On the face of it, this might look to be true but his is not entirely true because there are certain benefits to debtor as well.

Why Secured Finance is Beneficial to the Creditor

Security of Amount Lent

The most important benefit to the creditor is that the amount lent is secured. If there is a default by the borrower the creditor can sell the asset and recover the money lent to him.

High Ticket Loans

The creditor is able to disburse a higher loan amount per person. This is because the assets which are given to the lender as a security is usually of higher value. Since the value of asset is high a higher loan amount per person can be given.

More Loan Disbursals

These loans are secured and so the lenders are able to give loans to people even if they have a low credit score. The creditor is benefited because there is a considerable increase in the turnover of the loans given.

Less Number of Litigations

Since the loan is secured the borrowers are less like to default. This will help in preventing litigation which arises due to default in repayment of loan.

Why Secured Debt is Beneficial to the Borrower

There are various benefits that occur to the borrower when he takes a secured loan. Some of the benefits to the borrower(s) are:

Lower Interest Rate

The rate of interest that you pay on a secured loan is much lower than the interest rate on unsecured loan. This is because the rate of interest charged by the banks is directly related to the risk that they take in giving the loan. In a secured loan the risk of the lender is minimised because the loan that he has given is secured against an asset. Therefore the rates of interest charged for a secured loan is low.

Flexibility in Repayment

A secured loan is given based on the value of the asset be it movable or immovable, the lenders are more flexible with the repayment terms of the loan taken. Today if you take a car loan some lenders offer a repayment period of up to 7 or 8 years while you can get up to 20 years in a real estate loan. This makes the life of the borrower easier because the amount paid by him every month is small and he can easily repay the loan over the period of years.

Loan Availability even on Low Credit Score

The loans are made available to people who have a low credit score. This is because the creditor is secured against the asset and need not be much worried about the repayment capacity of I person. It goes without saying that the interest rate charged to a person with a high credit score is much lower than the interest rates charged for a person with a low credit score.

Interested in taking out a secured loan yourself? Visit the unsecured & secured personal loans section for a range of Australia’s most quality loan offers.

Back to top
Was this content helpful to you? No  Yes

Related Posts

Ask a Question

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the privacy policy, receive follow up emails related to and to create a user account where further replies to your questions will be sent.

Credit Cards Comparison

Rates last updated October 21st, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

Ask a question