What Are Collateral Loans? Using Your Assets to Borrow Money


Borrowing Money Against Your Assets

When you’re looking for a financial boost, collateral loans can be a great way to access larger sums of money. Collateral loans, also known as ‘secured loans’, allow you to borrow money against your assets. 

What assets can be considered as ‘collateral’ and how exactly can they help you access funding? In this article, Safrock will run you through everything you need to know before you apply for a loan.

Collateral Loans

What is ‘Collateral’ on a Loan?

Essentially, collateral refers to an asset that a lender accepts as ‘security’ for your loan. When you pledge collateral, it means that the lender can seize your asset should you default on loan repayments to recoup their losses. Lenders typically ask for collateral when they want assurance they won’t lose their money. That’s why secured loans tend to allow you to borrow larger amounts. 

Above all, lenders would rather get their money back than seize your property. They’re not in the business of dealing in cars or houses. They would rather not bring legal action against you, but collateral is often the easiest form of protection. After all – would you risk losing something you own? 

What Can I Use for Collateral on a Loan?

That all depends on the lender! In general, most financial providers will prefer assets that are easily valued and turned into cash. Some of the most common forms of collateral include:

  • Vehicles (e.g. cars, trucks, motorbikes etc.)
  • Property/real estate
  • Cash accounts 
  • Investments
  • Machinery
  • Equipment

Can You Use Your House as Collateral for a Loan?

Of course! You can access loans using property as collateral, usually for business financing or other home loans. Most of the time, you’ll need to own the property before you can use it as collateral. Otherwise, you’ll need to at least have enough equity to cover the loan amount. 

What is a Cross-Collateral Loan?

Basically, a cross-collateral loan enables a lender to use more than one asset as security for one or multiple loans with them. Cross-collateralisation is a method used predominantly for home loans and property investment. This is because as a property investor you could theoretically use the equity in one property as a deposit for another. 

That said, cross-collateralisation can be tricky to manage and there are many drawbacks to the method. If you’re considering a cross-collateral loan it’s worth speaking with a certified financial adviser on whether or not you’re prepared to take it on. 

How to Get a Loan With Collateral 

You can apply for secured loans with a range of banks, creditors, and online lenders. Regardless of where you apply, you can increase your chances of approval by being prepared. With collateral loans, a lender will require proof that you own the asset you are planning to use as security. In the case of a car, for example, this might be your registration. All lenders will have different requirements, so ensure you’re aware of this before you apply. 

The lender will go to adequate lengths to get a picture of your financial standing. This includes assessing information like your income, bank statements, and credit score. As with other loans, the better your financial standing, the better the rates and terms you’ll be offered.

Are Collateral Loans a Good Idea?

Determining whether or not a collateral loan is right for you will come down to what your personal finance needs are. Any form of finance comes with its own pros and cons attached. To help you figure out what might be the right option for you, we’ve put together a table of the key advantages and disadvantages of collateral loans:

Advantages Disadvantages
  • Often easier to get approved for
  • Usually have lower interest rates than unsecured loans
  • Enable you to borrow larger amounts
  • Might be a more complicated application process
  • Potential loss of asset, if you default on repayments


While this table is by no means exhaustive, it does give you a quick overview of the benefits associated with collateral loans.

Borrowing Without Collateral

If you don’t want to pledge collateral, it’s possible to find a lender willing to provide you with a non-collateral loan. Since the lender only has your signature to count on, these types of collateral-free loans are usually much smaller in size. Plus, you’re likely to pay a much higher interest rate on the loan because of the increased risk for the lender.

Some popular non-collateral finance situations you might be familiar with include:

  • Unsecured loans (e.g. personal loans or credit cards)
  • Some online loans (including peer to peer loans) 
  • Getting a cosigner to apply for the loan with you 

Find Secured Personal Loans Online Today!

If you’re on the hunt for collateral loans, Safrock could help you find reputable Aussie lenders today! We’re an online lender-finder that can match borrowers to lenders offering secured personal loans between $2,500 and $25,000. 

To apply, simply scroll up to start our free online application. When we get your completed form, we’ll search the internet for a lender capable of meeting your needs. If we find a match, we’ll connect you to your new lender for final approval. No hassle, no stress. 

Eligibility Requirements

To apply for a personal loan through Safrock, you just need to meet the following criteria:

  • Aged 18 years or older
  • An Australian citizen or permanent resident
  • Regular income for at least 3 months
  • Have an active mobile number and email address

If you meet these requirements, then you’re eligible for a loan with one of our lenders.

What You’ll Need

Safrock is 100% online so you don’t need to worry about providing any paperwork with your application form. All we ask is that you supply us with a few essential details! These include your:

  • Personal contact details (e.g. active mobile number and email address)
  • Car information
  • Internet banking details
  • MyGov information (if applicable)
  • Employment contact details

If you keep these details handy when you apply, it could take you just a few short minutes to breeze through your application. 

Apply Today!

Ready to apply with Safrock? Scroll up now to get started on your application!

Still have a few questions? No problem, just get in touch with our friendly team.

Found this article on collateral loans interesting? Check out our blog for more stories on personal finance! We recently covered everything you need to know about finding good loan rates and calculating loan interest

Safrock is a lender-finder that finds responsible lenders. We do not offer financial advice when it comes to small loans. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented on this website relate to your unique circumstances.