Navigating the world of student loans can feel overwhelming, especially when terms like ‘secured’ and ‘unsecured’ are used. Let’s explain them in simple terms so you can understand where student loans fit and what your options are, whether you’re studying in Australia or heading overseas.
What Are Secured Loans?
Secured loans are those that require you to put up an asset, like your car or home, as collateral (security for the loan). This means if you can’t keep up with the repayments, the lender has the right to take that asset to recover their money. Because there’s less risk for the lender, these loans often come with lower interest rates. Common examples include home loans and car loans, where the property or car being bought is the security.
What Are Unsecured Loans?
Unsecured loans, on the other hand, don’t require any collateral. Lenders assess you based on your creditworthiness and ability to repay, which is based on factors like your income and credit history. Since there’s no asset backing the loan, the risk is higher for lenders, which often means higher interest rates compared to secured ones. Some lenders may also ask for another person to support your application.
Secured vs Unsecured Loans at a Glance
| Secured loan | Unsecured loan | |
| Asset required | Yes, such as a car or home | No |
| If you can’t repay | The lender can take and sell the asset | No specific asset to take, but you are still legally responsible for the debt |
| Interest rates | Usually lower | Usually higher |
| Common examples | Home loans, car loans | Many personal loans, private student loans |
Whichever loan type you consider, compare the full cost, not just the interest rate. Your rate depends on your individual circumstances and may differ from the advertised rate.
Are Student Loans Secured or Unsecured?
In Australia, most student loans, including those under the Higher Education Loan Program (HELP), are unsecured. That means you don’t need to provide an asset to qualify. Instead, the Australian Government provides HELP loans to eligible students based on their enrolment in an eligible course with an approved provider. Repayments are income-contingent, meaning you only start making compulsory repayments once your income is above the repayment threshold.
However, if you’re planning to complete a full degree at a university overseas, HELP generally can’t be used to pay for it. A separate loan, OS-HELP, can help eligible Commonwealth-supported students (students in a government-subsidised university place) with costs such as airfares and accommodation when they study part of their Australian course overseas, for example on exchange. Students enrolling in a full degree abroad often turn to private student loans, which are also usually unsecured. Spark Finance offers student loans for Australians and New Zealanders studying internationally, subject to eligibility criteria and credit approval.
What Are The Key Differences Between HELP and A Private Student Lender?
Comparison of HELP vs. Private Student Loans (e.g., Spark Finance)
| Feature | HELP (Government Loan) | Private Student Loan (e.g., Spark Finance) |
| Security Type | Unsecured | Unsecured. Some Spark loans, including undergraduate loans for study abroad, require a cosigner. |
| Eligibility | Eligible students at approved Australian providers. Eligibility depends on citizenship or visa status. | Depends on the lender. Spark lends to Australian and New Zealand citizens studying overseas, and to international students studying in Australia or New Zealand. Eligibility criteria apply. |
| Repayment Start | When your repayment income is above the minimum threshold ($69,528 for 2026-27). Compulsory repayments are calculated only on income above the threshold | Set by your loan contract, not your income. For Spark undergraduate and international student loans, repayments start when the first funds are paid. Postgraduate borrowers studying overseas generally start repaying 6 months after finishing their studies, with a grace period of no more than two years in total |
| Interest Rate | No interest, but indexed each year (2.8% on 1 June 2026) | Interest is charged and varies by lender. Spark sets personalised rates (See our Interest Rate Approach). |
| Borrowing Limit | A HELP loan limit applies: $129,883 for most students in 2026, higher for some medicine and aviation courses | Depends on the lender’s assessment |
| Impact on Borrowing Power | Considered by lenders in home loan applications. In 2025, regulators updated their guidance on how lenders can treat HELP debt | Also considered but may carry higher weight due to repayments starting earlier. |
| Flexibility | Compulsory repayments rise and fall with your income, and you can make voluntary repayments | Set monthly repayments once repayments begin. Spark allows you to repay your loan early at any time without penalty. |
If you’re deciding between HELP and a private student loan, the key considerations are where you plan to study, how soon you can afford to repay, and whether you can access HELP at all. For those heading overseas, a private student loan may be an option. Before you sign up, compare repayment terms, interest rates, fees and borrowing limits, and check when repayments start.
Why Are Student Loans Unsecured?
HELP is a government scheme, so access depends on eligibility rules rather than on owning assets. Private lenders often offer student loans on an unsecured basis because many students don’t have valuable assets to use as collateral. Instead, they assess your credit history, your current financial situation and, in Spark’s case, your future earning potential, along with your cosigner’s profile where one is needed. The trade-off is that unsecured loans usually carry higher interest rates than secured loans to offset the increased risk.
Risks and Benefits of Unsecured Student Loans
Benefits:
No Collateral Needed: You don’t put up a specific asset, such as a car or home, that the lender can take if you can’t repay. You (and any cosigner) are still legally responsible for making the agreed repayments, and missed repayments can affect your credit history.
Access to Education: HELP lets eligible students defer the cost of their tuition, while private loans can help fund study that HELP doesn’t cover, such as a full degree overseas. With Spark, funds are paid directly to your university as fees fall due, rather than to you as a lump sum.
Flexible Repayments (HELP): You only make compulsory HELP repayments when your repayment income is above the threshold.
Risks:
Debt Accumulation: HELP debts are indexed each year, so the balance can grow if your repayments don’t keep pace. Private loans charge interest. For Spark loans with a grace period, simple interest (interest calculated only on the original amount borrowed) is charged during the grace period, so the amount you owe grows before repayments start. Once repayments begin, compound interest (interest calculated on the full balance, including interest already added) applies.
Repayments Start Sooner (Private Loans): Unlike HELP, private student loans usually require you to start repaying sooner, and your repayments are set by your loan contract rather than your income. If you think you may miss a repayment, contact your lender as early as possible to discuss support options.
Impact on Borrowing Power: Both HELP and private student loans are considered in home loan applications. Private loan repayments are a fixed commitment, which lenders take into account when assessing how much else you can borrow.
FAQ
Is a private student loan the same as a personal loan?
A private student loan is a type of personal loan that is used to pay for study. General personal loans can often be used for many purposes, such as buying a car or doing home renovations. Spark’s loans are designed to cover education costs, and funds are paid directly to the university.
Does having a cosigner make a loan secured?
No. A secured loan is backed by an asset, such as a car or home. A cosigner is a person who supports your loan application. On Spark loans, if you can’t make the repayments, your cosigner agrees to make them for you. The loan will also appear on your cosigner’s credit record. Read our Cosigner Overview before you both apply.
What is a comparison rate?
A comparison rate combines a loan’s interest rate with most of its fees into a single figure. It helps you compare the cost of loans from different lenders. Comparison rates depend on the loan amount and loan term used in the example, so check the assumptions the lender has used.
