The ins and outs of secured car loans


Nick Bendel

Nick Bendel

( 2 min read )

A secured car loan is a loan that is tied to collateral, or security. This security is generally the car itself.

The reason lenders ask for security is to guard against the risk of losing money. So if you take out a secured car loan and fail to repay the loan, the lender can seize your car, sell it and use the sale proceeds to cover the debt.

Some lenders also offer unsecured car loans, which are loans that are not tied to any collateral. Unsecured car loans carry more risk for the lender, so they generally have higher interest rates than secured car loans.

Secured car loans can be variable or fixed. A variable-rate loan can change at any time. For example, it might be 8.95 per cent on the day you take out the loan, but rise to 9.05 per cent one month later and then fall to 8.90 per cent six months later.

By contrast, a fixed-rate loan can’t change during the time for which it’s fixed. So if you take out a five-year fixed-rate loan priced at 8.95 per cent, you know that it will stay at 8.95 per cent for the entire five years.

Secured car loans are offered by a range of lenders, from the big four banks and well-known smaller lenders to credit unions and non-bank lenders.

There are four places you can get a secured car loan:

  • Direct from the lender
  • Through a car dealer (also known as dealer finance)
  • Through a finance broker
  • Through a comparison website, like RateCity

Regardless of which option you choose, you should always do some research on a comparison website. For example, the RateCity comparison search engine contains about 300 car loan products from several dozen lenders.

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