What is an Unsecured Car Loan?

Are you reviewing your financing options for a new vehicle purchase and wondering, “What is an unsecured car loan?” Simply put, an unsecured car loan is a loan in which the car isn’t considered as collateral. Learn more about unsecured auto loans with our guide below, then reach out to the Ken Ganley Kia Medina finance center near Strongsville for more information. 

Is a Car Loan Unsecured or Secured? 

Typically, car loans tend to be secured. Unsecured loans are most often given for home repairs or upgrades, or situations where there isn’t an item for the lender to use as collateral. Still, there are places where you can receive an unsecured car loan. Before you sign the dotted line, make sure you understand the type of loan you’re taking out. 

Difference Between Secured and Unsecured Car Loans

The main difference between secured and unsecured car loans is whether or not there’s collateral. With a secured loan, the car serves as collateral and the lender can take it back if the borrower stops paying. With unsecured auto loans, the car isn’t considered collateral. In place of collateral, some lenders require a co-signer. This is an individual who agrees to take over your loan payments in the event you stop paying. Other important differences between these 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

For those who don’t want to risk losing their vehicle, an unsecured auto loan may provide more peace of mind. If you have had credit issues, then a secured loan might be easier to acquire. 

Secured vs. Unsecured Car Loans: Which is Best?

Since the vehicle serves as collateral and added protection for the lender, secured loans are often easier to get and come with lower interest rates. The downside for borrowers is that their vehicles can be taken away if they miss payments. While there’s the potential for shorter terms or higher interest rates, losing your vehicle isn’t a concern with an unsecured loan. 

Get Financing Advice at Ken Ganley Kia Medina

Whether you’re ready to apply for a car loan or want to discuss measures to improve your credit, you can rely on the experienced financial experts at Ken Ganley Kia Medina. Reach out today with your financing questions!