Difference of Secured loan and Unsecured car loan

Autoloanscalculationtips - Joni went into a car dealership to look at a silver sports car. It was sleek and very very fast. Joni went for a test drive and just had to have the car. He got all the optional extras and then the car salesman arranged a loan for him. Joni drove away from the dealership with a loan for over $55,000 and an interest rate of 25% per year. When he got home he spoke to his dad and realised he had paid way too much for the car and the car loan was very uncompetitive.

Based in the situation above, If you don’t have the cash to pay for car upfront, you’ll need to borrow money. And, depending on the type of car you choose, you could be paying off your loan for some time. 

Apart from your home, a car is one of the biggest single purchases you’re ever likely to make. So don’t let the thrill of owning a car get in the way of making good financial decisions. There is any two type of auto car loan, Secured loan and Unsecured car loan. Difference of both type is :

1. Secured loan

With this type of loan you must offer an asset, such as the car you are buying, as security or collateral for the loan. If you don’t make repayments, the credit provider can repossess and sell your asset to get their money back (without going to court). 

The age of your car will affect its resale value. If your car is sold for less than you owe, you can end up having to pay the credit provider the difference.

2. Unsecured loan

With this type of loan you do not need to have an asset to offer as security. Unsecured loans are usually harder to get, as you need to convince credit providers that your credit worthiness and financial position are good enough for them to give you a loan without you having an asset to sell if you can’t pay your debt.

If you fail to repay the loan, the credit provider can still take you to court in order to sell your property and recover the money. Interest rates are usually higher than for secured loans, since the credit provider is taking a bigger risk.

Interest rates and fees and charges can stack up, so do your homework before you sign up for a loan. Shopping around for the best deal!