What is an Unsecured Car Loan?
While you’re reviewing your financing options for your new , you may be wondering, “What is an unsecured car loan?” Unsecured auto loans are loans in which the car is not considered collateral. Our finance department can help walk you through your different finance options so you can find one that works for your budget and credit history.
Don’t let a poor credit history deter you from seeking an auto loan. We offer auto loans for Mesa customers who have no credit or bad credit so that you can drive home in a used car no matter your credit score. Learn more about unsecured auto loans below.
Is a Car Loan Unsecured or Secured?
Secured auto loans are more common than unsecured auto loans. Unsecured loans are most often offered for home repair and upgrades in which there isn’t an item the lender can use as collateral. However, some car dealerships offer unsecured auto loans, which may interest some Surprise, car owners. Before you sign, make sure you understand what’s the difference between secured and unsecured car loans, so you drive home with the right financing plan for you.
Difference Between Secured and Unsecured Car Loans
Now that we’ve answered, “what is an unsecured car loan,” we’ll move on to the differences between secured and unsecured car loans. With a secured car loan, the lender uses your car as collateral if you’re unable to make a car payment. In an unsecured loan agreement, your car is not considered collateral, and the car cannot be repossessed if the borrower defaults on their payments. There are steps you can take to regain ownership of your vehicle if your car is repossessed due to non-payment, but an unsecured loan ensures that you’re not in danger of that happening. However, most lenders require a cosigner for unsecured car loans, which makes it more difficult for some Glendale drivers to obtain. Other differences between secured and unsecured car loans include:
Unsecured Auto Loans
- Typically offer shorter loan terms
- Can have fixed or variable rates
- Harder to qualify for
Secured Auto Loans
- Longer loan terms
- Has fixed interest rate
- Easier to qualify for with poor credit
An unsecured loan provides security against repossession if you default on a car payment. However, if you have a low credit score or other financial blemishes, you’ll find a secured loan easier to obtain.
Secured vs. Unsecured Car Loans: Which is Best?
With a secured car loan, lenders offer lower interest rates because they have the vehicle as collateral should you miss a payment. With an unsecured car loan, you will have higher interest rates, but you won’t have to worry about your car being repossessed for missing a payment. Depending on your financial situation, either loan may be the better option for you.
Explore Your Finance Options in Phoenix
Explore your financing options for your next at our financing center in Phoenix! Our financing team can help you choose a financing option that works for you. Secured and unsecured auto loans both have their virtues, but your financial history may help you to determine which loan to apply for.