Your Secured Car Loan: 3 Things You Need to Know
A new car can mean new job opportunities and more freedom – but, unfortunately, it can also mean it’s time to apply for a secured car loan.
Before you do, it’s important that you understand what it means to take out a secured loan. It’s also important to understand how it might affect or help your credit score, and why you should seriously consider a secured car loan as one of your better options.
So, if you’re in the market for a brand-new vehicle, here are three essential things to keep in mind about what a secured car loan can do for you and your finances.
To recap
What is a secured car loan?
A secured car loan is a type of financing option where the car you purchase acts as collateral for the loan. This means that if you are unable to make the secured car loan repayments, the lender has the right to repossess the vehicle to cover the outstanding debt.
The benefit of these types of car loans is that they typically offer lower secured car loan rates compared to other types of loans. This is because the risk to the lender is reduced by the collateral.
When comparing secured car loans, we’ll find that they often come with a variable interest rate and can vary in terms of the car loan term, allowing us to choose the best secured car loan that fits your financial situation.
It’s essential to consider these factors carefully to ensure that your loan remains manageable throughout its duration.
Why brokers like secured car loans
Brokers tend to prefer secured loans for a few reasons. First, that larger payment means they can stretch your payment schedule over a longer period of time, keeping them in business. It also gives them a chance to establish a relationship with you and get you in their door for a future secured car loan or other financial services.
A good broker also loves to see someone’s credit score go up. When you apply and get approved for a loan, your score increases. As you pay off your loan each month and ultimately pay it off, that can get you up into the higher echelon of credit scores and help you with future loans, big or small.
Of course, brokers appreciate having a car to borrow against. Cars are a sign that someone is employed and possibly in school, so it’s an easy loan to give. While it would be unfortunate for you to have to sell your car in order to pay off your secured loan, it also gives you a safety net. Should the worst happen, you have a means to cover your expenses.
What are unsecured car loans?
Unsecured car loans, on the other hand, do not require any collateral. This means that if you fail to make payments, there’s no immediate risk of losing any asset like a car. However, unsecured loans typically come with higher interest rates compared to secured loans. This is because the lender takes on a greater risk by providing a loan without any security.
When we’re considering an unsecured loan, it’s crucial to compare unsecured loans thoroughly. This involves looking at the interest rates, loan terms, and repayment options.
Although an unsecured loan might seem more appealing due to the lack of collateral, the higher interest rates can result in higher overall costs. Therefore, it’s vital for us to weigh our options and decide which type of loan aligns best with our financial stability and goals.
What you need to know
1. What a secured car loan means for you
When you sign up for a secured car loan, you essentially promise the lender that you will either pay the loan from your own bank account or you’ll sell your car to cover the payments. Both options mean that you will give back the money you borrowed to your broker or bank who supplied you the loan. This means that your loan supplier has less risk in giving you the loan.
Secured car finance loans can go as high as $100,000 AUD and typically offer a lower fixed interest rate than an unsecured car loan. That’s a huge advantage for you, as your secured car loan can help you get a much nicer, newer car and have an easier time paying it off.
That bigger secured car loan means you can opt for something like an electric or hybrid car, go for a newer model, and not have to deal with all the maintenance of a used or older car. You can also find something with better mileage, so you don’t have to worry about spikes in gas prices.
2. Why brokers like secured car loans
Brokers tend to prefer secured loans for a few reasons. First, that larger payment means they can stretch your payment schedule over a longer period of time, keeping them in business. It also gives them a chance to establish a relationship with you and get you in their door for a future secured car loan or other financial services.
A good broker also loves to see someone’s credit score go up. When you apply and get approved for a loan, your score increases. As you pay off your loan each month and ultimately pay it off, that can get you up into the higher echelon of credit scores and help you with future loans, big or small.
Of course, brokers appreciate having a car to borrow against. Cars are a sign that someone is employed and possibly in school, so it’s an easy loan to give. While it would be unfortunate for you to have to sell your car in order to pay off your secured loan, it also gives you a safety net. Should the worst happen, you have a means to cover your expenses.
3. What you need to apply
Before you get your secured car loan, have an exact car you want to buy and its price ready for your broker. They need the exact amount, (not an estimate), in order to break down your fees and your payment schedule.
To complete your application, grab the following:
- A copy of your last couple of paychecks/transfers as proof of income,
- Your government issued ID,
- Your ABN card (if you have one), and
- Bank statements from the past three months so your broker has a clear idea of how much you have coming in and out.
Plenty of brokers will take your application online, which can be helpful for a quick purchase. If you have a few days, try to meet with your broker online or in person so that you can ask any questions and get a better view of the long-term.
Once your approval for your secured car loan goes through, you should have your money within 24 hours. Banks may take longer, so don’t use a bank unless you’re sure you have time.
Contact us for your secured car loan today
In need of a new car? At LendEasy, we can help secure the money you need for that new car. Our team of professionals is ready to help you from start to finish. Contact us today and let us know what we can do for you.
Why wait? Get that car and put yourself in the fast lane to success.
