Have you been contemplating financing a new car but you’re worried about the costs? We all love a bargain so regardless of whether you’re buying a new or used car, you want to find the lowest interest possible. Finding secured car loans can help you lower the overall cost of your loan.
At Jacaranda Finance, we’ve decided to make a complete guide to secured car loans. Everything you need to know from interest rates to how to secure a car loan will be provided below. Ready? Let’s go!
If you’ve been on the hunt for a car loan, chances are you’ve been seeing the term ‘secured’ a lot. So what does this actually mean? A secured car loan is a method of borrowing money that requires you to attach an asset (also referred to as collateral) to your loan. This asset is something of value that the lender will use to cover the cost of a loan in the event that it fails. Assets that are commonly used as collateral include cars, motorbikes, caravans and boats.
When you apply for secured car loans, most lenders will require that you attach the car you are purchasing to your loan. If you’re unable to afford the repayments on the loan, the lender has the option to repossess your car to cover the cost of the loan. However, this is usually only done as a last resort.
There are some restrictions with secured loans that you should keep in mind. Taking out a secured car loan for a car might mean that you will have to purchase a new vehicle in good condition or of a certain value. This vehicle will be used as security which means it can get repossessed if you fail to make your repayments.
There are a few key differences between secured and unsecured loans. These are:
When taking out a secured car loan, it’ll come with either a fixed or variable interest rate. It’s important to choose the rate that will best suit your budget, goals, and meet your needs. Here are some of the differences between fixed and variable interest rates.
Read more about how to find the lowest car loan rates here!
There are many benefits and some drawbacks to secured loans. One of the benefits is the competitive interest rate that comes with secured loans. They usually come with lower interest rates than unsecured loans. Additionally, the vehicle provided as an asset doesn’t necessarily have to be completely brand new. It varies by lender but the majority will require a car that’s no older than 5 years.
One of the major drawbacks with taking out a secured car loan is risking your vehicle. Although having your car as collateral tends to improve your car loan rate, it also means that defaulting on your loan could cost you your car. It’s recommended you take out a loan when it’s completely necessary and you are confident you can keep on top of your repayments and pay it back in full.
When considering applying for secured car loans, here’s what you should look out for:
Before applying for a loan, here are the documents you’ll want to organise to provide. These include but are not limited to:
Want to read more? Learn about bad credit car loans here!
Young entrepreneur Daniel Wessels is the CEO and Founder of Jacaranda Finance. Although only in his early thirties, Wessels’ determination and adaptability has led him to successfully pioneer a range of other enterprises both here and abroad.Read More
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