Vadim Ru
February 04, 2019

Secured Loan vs. Unsecured loan

If you are considering borrowing money, you must make a decision regarding choosing a secured or an unsecured loan. Here, we briefly explain the differences between the two types of loans.

A secured loan is backed by any collateral, which is something valuable such as a home or a car. In this type of loan, the lender has the right to legally take over your collateral in case you are unable to repay the loan. Mortgage and a car loan are common kinds of secured loan.

If you sign up for a secured car loan, your lender uses your car as security. This implies that if you default on your loan, lenders can sell your vehicle to recoup the funds. A few benefits of taking secured loans include a lower interest rate and a chance to borrow a higher amount.

Although nothing happens to your collateral in case you borrow an unsecured loan, these loans usually come at a higher interest rate. In addition to unsecured car loans, some common kinds of unsecured loan include student loans, credit cards and personal loans.

Benefits of Secured Car loans

A secured car loan is a popular type of car loan because it’s for anyone who intends to purchase a vehicle. When you borrow a secured car loan, the lender sets a fixed loan term as well as a fixed interest rate. The borrower knows every detail about the car loan repayments and is fully aware of the duration of the loan term.

The key benefit of borrowing a secured car loan is that you can get a lower interest rate, which is not the case in an unsecured car loan. The lender is able to offer you a better rate because if a borrower fails to pay back the loan, he can legally acquire the vehicle. The lender can either keep the car or sell the vehicle to recover the loan amount. He has a registered right to reclaim your vehicle if you fail to make repayments for the duration of the loan term.

However, once the borrower successfully repays the loan, the lender removes the registered interest over the car and the car is 100% your property. In the event of any mitigating circumstances that imply you can’t meet your next repayment, discuss with your lender before the payment falls due for arranging a repayment break.

With online banks and lenders coming into play, it’s great to benefit from a competitive market to get the best possible secured car loan. Most lenders make sure you get good interest rates so you have enough time to make the entire repayment.

Final Thoughts

Applying for a secured car loan in Australia is quick and easy. There is no tedious paperwork or long phone calls to discuss the terms and conditions. Thinking about getting a car loan? Get in touch with us if you want to know more about how you can borrow a secured auto loan that best fits your needs.

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