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Types of Car Loans

Car loans provide consumers with an easy way to afford the purchase of a vehicle. Vehicle finance is often a great way to purchase a car and pay low, monthly payments over a period of time. Whether you choose a secured car loan or an unsecured car loan, such as a personal loan, you will want to pay attention to the loan rates and the interest rates, as they can often greatly affect the loan and the loan’s repayment terms.

Types of Car Loans

The Internet provides a great place to compare both unsecured car loans and secured car loans, as many online lenders offer easy applications and competitive rates and terms.

Vehicle finance is usually available as either a secured or unsecured loan:

Secured Car Loans

Secured car loans typically use the vehicle as collateral, which provides a form of security for the lender should you fail to repay the car loan. The lender can repossess the car should you default on a secured car loan.

With that said, secured car loans offer many benefits to consumers, as they offer lower interest rates than unsecured loans, which therefore equates to lower monthly payments. Most secured car loans also offer flexible repayment terms, and most offer a fairly easy and straightforward application process.

Unsecured Car Loans

Unsecured car loans, which typically take on the form of a personal loan, are loans which are not secured against the borrower’s assets. In other words, the lender can not take your home or your car should you default on the terms of the loan.

Although lenders typically charge higher interest rates on unsecured car loans, good credit and strong finances can often afford you a lower interest rate.

Unsecured car loans may be harder to get than secured car loans, and all require good finances, a steady income and a clear credit history.

A personal loan may be used for vehicle finance, as it serves as an unsecured loan. Unsecured car loans may be ideal for renters or for those who do not want to put up their assets as collateral.