Secured vs. Unsecured Car Loans

You can think of a secured loan like a loan ‘with security’ – which means the asset, for example the car you buy, is used as a type of guarantee against the money you borrow from a lender.

Another common example of a secured loan is a home loan or mortgage. 

In some cases, lenders may consider a secured loan where they wouldn't consider an unsecured loan. Depending on your situation, they may also be able to provide lower interest rates compared to an unsecured loan.

From a lender’s perspective, a secured loan is typically considered less risky than an unsecured loan. This is because if something were to happen – worst case scenario! – the lender technically has the right to sell the asset you put up as security (like your car) to recoup its money. But don’t stress, as long as you’re responsible and make your repayments on time, you’ll be just fine.

An unsecured loan means you’re borrowing money for a specific purpose and you’re able to get approved because of your “credit-worthiness”. It’s different from a secured loan since the lender does not have rights to an asset (like a car or house). Unsecured loans may be used for travel, home renovation, weddings or debt consolidation.

An unsecured loan may be used to help consolidate your debt or help you reach specific goals. You should however feel comfortable and in a secure position to meet regular repayments without feeling burdened by them. 

Check out our recent post on questions you should be asking if you’re considering applying for an unsecured personal loan, especially during COVID-19.

If you’re in the market for a new ride and are considering a secured car loan, Wisr offers great low rates for strong credit. You can learn more about what we offer below.