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If you’re new to car loans, you may be asking these questions: what is a secured car loan? What is the difference between a secured and an unsecured car loan?
These terms describe two different types of car loans.
What is a secured car loan?A secured car loan lets you offer up an asset (like the car you’re buying) as security for your loan. This means that if you can’t pay back your debt, the lender may be able to take possession of the security. Motorcycles and caravans can also be used as security for secured loans.
A secured car loan can potentially have a lower interest rate, but it depends on the terms of the loan.
If you’re considering a secured car loan, you’ll need to provide a few things with your application that are required for all loans. The likely information will include payslips and proof of employment. You may also need to provide additional information about your regular ongoing expenses including any other debt repayments. These will form part of the lender’s assessment for a loan.
The car you’re buying will also impact whether you can get a secured car loan.
What is an unsecured car loan?An unsecured car loan is a loan where you do not provide security over an asset. If you’re buying a used car and it doesn’t meet requirements for a secured car loan, this type of loan could be an option.
An unsecured loan has the benefit that the lender doesn’t need your car as security. It also means you don’t need to know the details of the car you’re buying when you apply for the loan. Unsecured loans are also usually simpler to apply for online and the money can usually be used more flexibly than with a secured loan which requires an asset to be offered as security.
However, unsecured loans have strict eligibility criteria and usually have higher interest rates than secured loans. Comparing things like fees, interest rates, flexibility, loan terms and other features are additional ways you can work out whether a secured or unsecured car loan is right for you.
People’s Choice offers both secured and unsecured personal loans.
Do I need a loan to buy a car?A loan is one way you can buy a car. Every loan is a commitment, so if you’re not sure if getting a loan, specifically a car loan, is the right decision for you, feel free to get in touch with us for some personalised help.
We’ve put together a step-by-step guide to getting your first car loan, and you can also use our handy personal loan calculator, to help work out how much your car loan repayments might be.
If you’re ready to apply for a car loan, you can check out our personal loans and apply online today. We have pre-approval available which is valid for 90 days.