2021 Hyundai Elantra

What is an Unsecured Car Loan?

Interested in reviewing your financing options on a new vehicle purchase and wondering, “What is an unsecured car loan?” In short, an unsecured car loan is a loan in which the car isn’t considered as collateral. If you’d like to learn more about unsecured auto loans, trust the South Point Hyundai finance team to get you the answers you’re looking for.

 

 

Is a Car Loan Unsecured or Secured? 

In general, cal loans tend to be secured. Unsecured loans are most often given for home repairs or upgrades, situations where there isn’t an item for the lender to use collateral. There are still instances, however, where you can receive an unsecured car loan. But before you sign the paperwork, you’ll want to 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 a collateral. This means that you’ll need a cosigner who will agree to take over your loan payments in the event you stop payments. 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

Secured vs. Unsecured Car Loans: Which is Best?

Secured loans are often easier to obtain and come with lower interest rates since the vehicle serves as collateral and is added protection for the lender. The downside for borrowers is that the vehicle can be repossessed if payments cease. While there is potential for shorter terms and higher interest rates, losing your vehicle isn’t a concern with an unsecured loan. Which is better for you depends on your needs.

Get Financing Advice at South Point Hyundai

No matter if you’re ready to apply for financing or you want more car-buying tips, the finance experts at South Point Hyundai can help. Contact us today with any questions or to get the process started. Also be sure to learn more about buying and leasing with our team.

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