UNSECURED CAR LOAN
An unsecured car loan is the type of car loan that does not require any collateral or security. It is a loan that is usually granted based on your credit history, financial standing, income status, and current employment which all determines your loan repayment potential. Since no collateral is provided, these loans can attract higher interest rates but offer you more flexibility on what car you spend the money on.
The lender considers this type of car loan riskier as they have nothing to sell when they need to get their loan amount back in the event of a default. To offset this additional risk, lenders give unsecured loans at a higher interest rate. Even if your credit history and rating is not perfect, you can still get your car through car financing.
THE INTEREST RATE ON UNSECURED CAR LOANS
The term of the unsecured loans, as well as their interest, are fixed. This will allow you to plan the monthly payments and make adequate preparations. Unsecured loans are also given to those who are receiving income support like those receiving pensions. However, there are certain criteria that the borrower must meet in order to be eligible for an unsecured car loan. The major criteria are that the borrower must have a full-time job and be over 18. Usually. There are also minimum criteria for monthly income too. If you are planning to buy a used car, note that unsecured loans are usually not granted on cars that are more than five years old.
As with anything in the world, unsecured car loans have their own pros and cons. Some of the advantages and disadvantages are discussed below.
ADVANTAGES OF UNSECURED LOANS
Here are some of the advantages of unsecured car loans:
- Older Assets Accepted: Because the car finance lender is not taking security over the car, they do not require it to be under a certain age, or by a certain manufacturer. This makes them a useful option for people looking at cars over 12 years old, or grey import cars which most secured lenders will not finance.
- No Payout Penalties: most unsecured car loans, often referred to as personal loans, have no early payout fees. That means that even if the interest rate is higher, if you pay the loan out earlier you may end up paying less in fees and interest than you would with a ‘lower rate’ secured car loan.
- You do not have to rely on dealership finance: One of the advantages of an unsecured car loan is that you don't need to get funding from the finance department of your dealers. Your car loan can be gotten from any lender, including online brokers like Auto Car Loans.
Being able to self-finance also means you are not bound by a dealer's financing terms. Aside from that, you can do rate comparison and choose the loan terms that favours you the most.
- Receive funds for the purchase: The lender that issues the financing will issue funds for the full loan amount when you are approved for an unsecured car loan. With these funds, you then pay for the car. Since you are paying for the car in this way, after paying the dealer, the ownership of the car will be transferred to you immediately which means it is now your car.
- The car is in no danger of being repossessed: Another interesting feature is that in the event of a loan default, the vehicle does not face the risk of being repossessed. The car is not serving as collateral since it is an unsecured loan. However you should always make sure you meet your loan repayments as defaults will go on your credit file which will impact your ability to get other loans in the future.
DISADVANTAGES OF AN UNSECURED CAR LOAN
- Higher rates possible: Every lender knows that unsecured loans are more risky, and that is why interest rates are higher. Since the car does not serve as collateral, and your lender will not be able to repossess the car in the event of a failure, these loans can have higher interest rates than the secured car loans. Higher rates in the sense that in the long run, you will pay more for the vehicle.
- Credit is still important: Even if the car does not face the risk of repossession, if an unsecured car loan is not paid back, there are negative consequences. If your payment is not received by the due date, your lender may penalise you by charging a late fee. Also, your lender may report you to a credit bureau if your payments are more than 30 days past due. This may result in lowering your credit score.
- Defaulting always hurts: Your lender may take additional action anytime you are not able to catch up on your payment. These additional actions may involve the lender sending your information to a debt collection agency or asking for a judgment on your credit report. Your credit score might be affected by these negative comments thereby lowering it and may remain on your credit report for up to seven years at most.
HOW TO QUALIFY FOR AN UNSECURED CAR LOAN
Not all individuals who apply are eligible for an unsecured car loan. Due to the high risk involved in these loans, only certain applicants will satisfy the required criteria.
Here are some of the requirements for an unsecured loan:
- Okay credit history: Approving an unsecured car loan requires an okay credit rating. If your credit report shows a lower credit score or recent negative information or defaults, you may not be eligible for this type of funding. The minimum creditworthiness requirements vary depending on the lender. However, good payment history will indicate that you have a high credit score.
- Stable employment / high income: As for any type of loan, the lender reviews your employment and income. However, since unsecured car loans are riskier, just having a job or income is not enough. Lenders also consider the stability of your job by looking for a long employment record. Do not forget that these loans can have higher monthly payments due to their higher interest. For this reason, a minimum income is required by most lenders.
Carry out adequate research so that you can choose a suitable lender who understands your financial conditions perfectly. Also, ensure regular payments of your unsecured car loan and avoid any debts to improve your credit score. For faster processing and approval of the unsecured car loan, look for a lender online.
BENEFITS OF CAR FINANCE WITH AUTO CAR LOANS
For many people that come to us at Auto Car Loans, car finance helps them get on the road very quickly. Besides, you will get to enjoy some or all of these other benefits:
- Borrow up to 100% of the total cost of the car
- Taking out a car loan without having to pay a deposit
- Ability to add a residual balloon payment at the end of the loan
- Loan term that is convenient for you
- Fast and easy loan application
- Multiple approval pathways for non-conforming applicants
- We select the best loan offers from our panel of more than 50 lenders
- Competitive interest rates
Here at Auto Car Loans, we work with over 50 lenders, and that ensures if approved, you could see a result on the same day.
You could qualify for car finance if you are above 18 years of age. So, we encourage you to apply with us if you are an adult. We offer an effective and straightforward process to determine eligibility, and in no time, we will match you with a leading lender that meets your requirements. We save you the time and stress of searching for a suitable lender, providing you with an efficient car loan at quick turnaround times.
Getting started is easy. You only need to submit a simple application by visiting https://autocarloans.com.au/apply
, and then fill out your information, it takes only 5 minutes. If approved, we will match you with our top lenders as fast as possible.
WHY CHOOSE AUTO CAR LOANS FOR YOUR CAR FINANCE?
- We can offer significant savings that banks or dealerships cannot give you
- We offer efficient and quick turnaround times
- Unique and custom service tailored to individual needs
- Access to a variety of leading lenders, so there is an option suitable for your needs
- We can offer loans without early payout penalties
- Expert loan consultants ready to help.
OTHER USEFUL INFORMATION
As we have mentioned before, we have a close relationship with a wide range of lenders specialising in car loans. We work closely with them to ensure that you have
an easy and simple process. Trust us, we know how important your time is and we want to make sure you get a car as fast as possible. Therefore, our car loan consultants will take the burden of finding a suitable lender off your shoulders and get to work to ensure you purchase your vehicle in no time.
Auto Car Loans is committed to ensuring you get a great car finance deal so that you can drive away in your new car sooner.
Client satisfaction is at the core of our service.
CONTACT US TODAY
If you need a car loan to purchase your next vehicle, then feel free to fill out the application form by visiting the link above. Alternatively, contact us today on 1300 301 051
to speak with one of our car finance consultants that will guide you throughout the whole process.
DISCLAIMER : The thoughts and opinions conveyed on this website are those of the authors only and are of a general nature. This does not constitute financial or general advice to you from Auto Loans Group. You should seek your own independent advice from a professional which is specific to your circumstances before considering any of the items referred to in this article, including finance, insurance, and car buying.