In the world of car financing, there are two main categories of auto loans. The categories are unsecured loans and secured loans (commonly called collateral loans). An unsecured loan is one that is offered on the basis of a borrower’s creditworthiness. On the other hand, with a collateral loan, an existing asset is used as security for the repayment of the loan. This asset will be forfeited if the borrower defaults on the auto loan.
If you have bad credit, a collateral loan is your best option for accessing car financing. Here’s why:
1. Collateral loans have fewer requirements
When you opt for a collateral loan, a lender is more willing to look beyond your credit score and your income to grant you an auto loan. This is because the lender can seize your asset to recover their money if you fail to repay the loan.
2. The process is faster with a collateral loan
Before a lender gives an unsecured loan, there are a number of things they will have to do. Among other things, they must do credit checks and conduct a risk assessment to see whether or not an individual is eligible for the auto loan. However, a collateral loan requires less investigation because an asset is used to protect the lender’s money.
3. Collateral loans usually offer better rates
If you were to try to access an unsecured loan with bad credit, it would be near impossible to be approved. And for those lenders who might agree to give you an auto loan without collateral, they will probably do so at extremely high rates. When you take a collateral loan, the risk that the lender takes is significantly reduced. With lower risks comes lower interest rates. Lower interest rates mean a collateral loan is much easier to repay. Therefore, you are less likely to default.
4. Collateral loans can help improve your credit score
When you demonstrate that you can maintain healthy credit accounts, you will see your credit score gradually improve. To do this you must always make (at least your minimum) loan payments on time each month. Since a collateral loan is easier to access and maintain, it provides a great opportunity to improve your bad credit.
Do you need an auto loan but have bad credit?
If you have bad credit and need a collateral loan to purchase a new vehicle, Instant Auto Loans will offer you a loan based on the equity you have in a vehicle you already own. With Instant Auto Loans, you will easily qualify and can have your loan approved in as little as 15 minutes.
For over 30 years, we have provided the residents of Surrey, Burnaby and surrounding areas with auto collateral loans and you can trust that we will provide you with courteous and professional service. We guarantee that your information is secure and is never sold to third party vendors. Also, we have some of the best rates in the short-term lending industry with straight-forward repayment terms. So, what are you waiting for? Apply now to start your application today. Let us provide you with a flexible auto collateral loan that is tailored to meet your needs.