When it comes to Car Loans there are essentially two options:
- Secured Loan
- Unsecured Loan
The question is, which is the right option for you and what will suit your needs and personal circumstances best?
Both can have their advantages and disadvantages, but this is really dependent on the individual, which option will suit you better.
Let’s take a look at some pros and cons of both Secured and unsecured Car Loan services so you have a better understanding.
Unsecured Loans Usually Attract Higher Interest Rates
This is not always the case 100% of the time, but usually, an unsecured loan for the same amount will attract a slightly higher interest rate than a secured Car Loan where you offer something as security against the loan. The reason for this difference in interest rate is there is more risk to the lender when they offer a borrower an unsecured loan. If the borrower reneges on the loan, the lender has nothing as security to sell to recoup at least some of the money owing.
While there’s nothing wrong with unsecured loans from a borrower’s perspective, just keep in mind that you’ll likely pay more in interest.
Secured Car Loans Put Your Collateral At Risk
In many cases, the security used for a secured Car Loan is the car itself. In other words, if you fail to repay the loan, the lender could seize your car, so they can sell it and retrieve some of the lost funds. If there is money still owing after the car has been sold, the borrower is still liable to repay that debt.
At other times, people may even put their home up as collateral for a secured Car Loan, or other items of significant value. Car Loan providers are not all the same. What each lender accepts as security can vary, so be sure to verify it with them first before chasing a secured Car Loan.
An Unsecured Car Loan Is a Perfect Option If You Don’t Have Collateral
Not everyone has something to offer as collateral against a loan and not everyone will be willing to use the car they plan on purchasing as collateral against the loan, either. Secured loans come with an element of risk, but if you simply have nothing to offer, then you won’t have a choice but to apply for an unsecured Car Loan.
Do You Really Want To Put Your Car On the Line?
This is one of the most important questions to consider when you’re tossing up between a secured Car Loan and an unsecured Car Loan.
Do you want to have that new car on the line should you have any problems repaying the debt?
While getting that debt paid back is your obligation and something you should strive to do no matter what, there is more freedom having an unsecured Car Loan so the lender doesn’t have claims on that car.
Chances are, if a lender were to seize your car and sell it, the amount it ends up being sold for could be well below market value, just to get a quick sale. This won’t always be the case, of course, but it’s still a possibility.
When a car is used as security, you, the owner, will have a hard time selling a vehicle that has finance owing on it anyway. With an unsecured loan, with the car not being used as collateral, the vehicle itself is technically within your ownership, leaving you free to sell it at your desired price.
Approach a Private Lender For An Unsecured Car Loan
When it comes to getting the car you want and you need fast cash, Australia offers a few options, particularly in the private lending sector. If you need a Personal Loan and cash today, so you can get a car sooner rather than later, then approach a private lender for an unsecured Car Loan.
Private lenders offer fast loan approvals, competitive interest rates and a range of terms to suit your personal requirements. It’s certainly worth looking into the private lending sector if you want to buy a car.
The Wrap
There are advantages to both secured and unsecured Car Loans, but there is more financial freedom when you get an unsecured loan from the lender of your choice.