When the lender wants loan security
Lenders will sometimes ask that you provide some type of security before they will approve a loan, just in case you cannot repay them. One form of security is the car itself. If you agree to put the car up as security you:
- must take care of the car and tell the lender where it is if they ask;
- will generally need to take out comprehensive insurance on the car for the term of the loan;
- cannot sell the car without the lender's permission.
If the car is taken as security the lender will have an interest in it and will register this interest with the Personal Property Securities Register (PPSR).
The car will then be recorded as encumbered that is having an outstanding loan attached to it.