What is an Unsecured Car Loan?

Tiny car with coins and finance paperwork

If you’re shopping for a new Hyundai model you may have heard the term “unsecured car loan.” What is an unsecured car loan? An unsecured car loan is a loan where the car isn’t considered as collateral, instead a loan is approved based on the credit history of the borrower and requires a co-signer. Learn more about the differences between secured and unsecured car loans with Hyundai of Asheville below, or contact our team if you have any questions about our car financing process

Is a Car Loan Unsecured or Secured? 

Usually car loans are secured. Unsecured car loans are mostly given for home repairs or upgrades – situations where there isn’t an item a lender can use as collateral. There are many places in Black Mountain where drivers can get an unsecured car loan, but special care and attention to detail need to be used. Before you sign an unsecured loan, make sure you understand the fine print and the overall details of the loan you’re taking out. 

Difference Between Secured and Unsecured Car Loans

The main difference between secured and unsecured car loans is if there is an object being used as collateral. In a secured loan, the car serves as collateral and the lender can take the vehicle back if the borrower stops paying. An unsecured loan uses a co-signer instead of collateral. The co-signer is an individual who agrees to take over the loan payments in the event that the borrower stops paying or is no longer able to pay. See the other important differences between secured and unsecured loans below:

Unsecured Auto Loans

  • Typically offer shorter loan terms
  • Can have fixed or variable rates
  • It’s harder to qualify 

Secured Auto Loans

  • Longer loan terms
  • Has fixed interest rate
  • Easier to qualify for with poor credit

For Hendersonville drivers who don’t want to risk losing their vehicle, an unsecured auto loan can provide more peace of mind. However, a secured loan might be easier to acquire for drivers who have a poor credit history or no credit history. 

Secured vs. Unsecured Car Loans: Which is Best?

If you’re considering getting a loan for home improvements or another Weaverville project, you may be wondering which option is best for you. A secured loan will be easier to come by since there is more protection for the lender when a vehicle is used as collateral. Secured loans may also come with lower interest rates. While an unsecured loan can come with shorter terms and higher interest rates, drivers won’t risk losing their vehicle. The loan you pick will ultimately be decided by your circumstances and your finances.

Get Financing Advice from Hyundai of Asheville.

Whether you’re ready to apply for financing or if you want to learn more about what credit score is needed to finance a car, you can rely on our expert finance team and car buying tips. Reach out to our Asheville dealership today with your financing questions!

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