Loans secured by car
What are loans secured by car?
Secured loans are where lenders advance you money with the loan being protected by an asset you own or some other type of collateral. Loans secured by car are one way of securing a loan and the lender takes a lien out on the vehicle. A bank or finance company will hold the ownership of the car until you have paid off the loan in full. This includes any applicable fees and interest, and when everything has been paid up the car reverts to your ownership. If you intend to use a loan to buy a new or second-hand car, where the loan is secured on it, you should check with financial institutions in terms of their requirements relating to the age of the car and whether you could split a loan to buy, for example, some furniture as well.
Why do people use loans secured by car?
Loans secured by car are useful when you want to borrow a significant amount of money. When a lender has an asset such as car as security you are likely to be able to borrow a larger amount than if your loan was unsecured, so if your car has a good value your borrowing options may be enhanced. That security, where in the event of you defaulting on loan repayments the lender has the right to sell the vehicle, can also offer benefits such as a lower interest rate on what you have borrowed and the possibility of having a longer time period to make repayments. It will depend on how much your loan is and it's worth comparing a range of potential lenders to look for the deal that suits you the best.
What are the main features of loans secured by car?
When you take out a personal loan secured by car you are giving an assurance to the lender in the form of a tangible asset. It is effectively a guarantee that they will get their money back one way or another. If you repay everything in full the ownership of the car reverts to you from being owned by the financial institution. Lenders believe you are more likely to pay off a secured loan because if you don't you effectively wasted a lot of money because they may then dispose of the vehicle to get their money returned. Look for good interest rates and negotiate your levels of repayment and how many years they will last.
Loans secured by car can be set up with either variable or fixed interest rates, enabling you to decide what best matches your personal circumstances.
What are the pros and cons of loans secured by car?
With this type of loan you have the possibility of borrowing more by having the loan secured by car. You are more likely to get a lower interest rate and be able to have a longer time for repaying.
Failing to pay off the loan will leave you seriously out of pocket and without your car, so bear that in mind when going ahead with this type of product.