If you are looking for a new car and you don’t have enough money to afford it right now, then you will probably start looking at car loans. At that time, you must be aware of the terms like a secured and unsecured loan. Now the point is that what is secured loan and how is it different from an unsecured loan.
Secured loans: more security for the bank and a lower rate for you
Bank will provide you the security in the case of secured loans when you don’t have enough money to repay the loan amount then the bank will sell your car to recoup the money. Now you are thinking what’s the benefit for you. Actually, when you purchase a cat on secured loans from the bank, then it increases your security, and the lender will decrease your interest rate. In this way, it will lower your monthly payments by reducing the risks.
Unsecured loans: no security for the bank and higher rate for you
In case of unsecured loans, there are more risky loans for the lender as there is no security on your property for the bank. So the lender will increase your interest rate, and you’ll have to pay more.
Who is secured car loans for?
Most of the loans are actually secured loans, and it’s mostly for the person who wants to buy a car which is less than seven years old.
How do I protect my secured property?
Taking secured loans rather than unsecured loans gives you much more advantages of affordable finance. There’s a couple of options for you so that you can’t lose your car.
1-Loan protection insurance
When you buy a car loan, you have the option of loan protection insurance. If you accept that offer, then you just have to pay just some more money other than your payments.
The benefit is that when you are out of work, then the insurance company will pay your loan and you will not lose your car.
2-Ask your lender for a repayment break.
During your unfavorable circumstances when you don’t have money to pay your payment, then there’s an option for you to talk to your lender about your unfortunate situation. But you have to do this before the due date of the loan’s submission.
The lender will give you enough time for repayment so that you won’t lose your car.
If you have a serious injury or sudden illness due to which you are unable to work, then income protection will cover your lost income. It can include your income up to 75 percent.
With the right income protection in place, you will be able to make your payments on car loans or any other assets you have secured, and you will not lose them.
Before choosing any loan, you might want to think about how you will factor it in your budget for the life of the loan.
Learn how much could you borrow with a car loan
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Take a look at the rates and features on the Westpac car loan.