Secured auto loan. There are two types of loans that you can access if you need car financing to purchase a vehicle—unsecured and secured auto loans. An unsecured loan is one that is given simply based on the borrower’s creditworthiness. Therefore, unsecured loans are usually given to people with very high credit scores. On the hand, if your credit score is not impressive enough for you to get an unsecured loan, you will have to apply for a secured loan instead. A secured loan is one in which the borrower uses an asset as collateral for the loan.
Here are 5 types of assets you can use as collateral for a secured auto loan:
1. The vehicle you are purchasing
The vehicle you are purchasing will become an immediate source of collateral you can use to secure the loan. To do this, you will need to turn the title over to the lender right away. The lender will then hold on to the title until you have cleared your loan.
2. A vehicle you already own
If you own another vehicle you may use it as security for an auto loan. This option will work for you once you do not have an outstanding balance and you have outright ownership of the vehicle. You must bear in mind, however, that the equity in your existing vehicle may not be enough to cover the cost of the new one. In that case, you will need to find the money upfront to cover the difference.
A stock certificate is a great collateral to use to secure car financing. For the duration of your loan, the lender will hold on to your certificate. The good part about using your stocks is that they will continue to earn interest while you pay off your auto loan. This could even help you to get a lower interest rate.
4. Savings account
A savings account works in the same way that a stock certificate when used as collateral for a secured auto loan. The account you choose will continue to earn interest though the account will be on hold while you owe the lender. This hold does not mean you will not be able to use your account, but it means the amount you are able to take out will be limited on you will a small window of time to replace the money to maintain a minimum balance. This option is possible when you have enough money available to cover the cost of the car but do not want to completely deplete your savings.
5. Your home
Once you have equity in your home, you may use it to secure car financing. However, this is a very risky option as there is a possibility of you losing your home if you are unable to keep up with your auto loan payments. That is why you should only consider this after you’ve exhausted all other options. If you do choose to use your home as collateral, ensure you take a very low loan limit to avoid taking on too much debt in your property.
Do you need a secured auto loan?
If you need car financing to buy a car, Instant Auto Loans will offer you a secured auto loan with straight-forward repayment terms and interest rates that are among the best in the industry. Regardless of your credit history, you can easily qualify and have your loan approved in just 15 minutes. So, what are you waiting for? Apply now!