Buying a new car is always an exciting proposition but not everyone can afford it. In case you are going in for a car loan, there are two options to choose from. You can either opt for a secured auto loan or an unsecured one for purchasing a new or an old car. In a secured auto loan, you have to generally keep the car that you are buying as collateral. This car basically acts as a security against your loan. On the other hand, in an unsecured loan, there is no collateral. The terms and conditions can also be different for both the types of loans.
There might be instances where you can be asked by the auto loan lender to keep something else than your vehicle for security purpose. But this will happen only if have an extremely bad credit or a noticeably low income. However, there are still a lot of benefits of a secured auto loan.
Read on to know why opting for secured auto loans is a better choice:
- Secured car loans can be obtained by almost everyone, irrespective of their credit status.
- There are no rigid repayment terms and conditions and this is what draws people towards secured auto loans. A buyer has the flexibility of choosing to repay the loan over a longer period of time as compared to an unsecured loan offer. This means that affordable payment options are available in case of secured loans.
- In a secured loan, when you offer your car as collateral, remember that the law allows him to recover the vehicle if you are unable to pay the loan.
- These loans are really beneficial for those who have no credit history at all. You can timely repay the loan and make a good credit record.
- On the other hand, if you have a poor credit history, you can re-establish it by paying back the loan on time.
- Most importantly, people with poor credit or no credit at all can also avail the facility of a secured loan without the essential requirement of a guarantor for the loan.
- The lenders for secured auto loans do not strictly demand a certain income level from the borrower as eligibility criteria. This is because an auto loan is already secured against collateral and so you can easily avail its benefits even if you have a noteworthy freelance income or maturing investments.
In nutshell, secured auto loans are a very good option for those who want to buy a car but cannot really afford it. Even the interest rates levied in case of secured loans are generally lesser than what you have to bear in the case of unsecured loans. Therefore, it is a preferred choice in case of auto loans.
Just take care to weigh the benefits and check the penalties involved. Thereafter, you can easily opt for a secured auto loan.