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General information only: This guide does not consider your objectives, financial situation or needs and is not financial advice. Credit eligibility, rates and terms depend on the lender's assessment.
What a secured car loan means
With a secured car loan, the lender takes a security interest in the vehicle. If the borrower does not meet the contract, the lender may have rights to repossess and sell the vehicle. Sale proceeds may not cover the full debt, so a remaining balance can still be payable.
Because the vehicle reduces some of the lender’s risk, secured loans may have different pricing or eligibility criteria from unsecured credit. The outcome depends on the lender, vehicle and applicant.
What an unsecured loan means
An unsecured personal loan does not use the vehicle as specific security. That does not remove the obligation to repay, and the lender may still take recovery action if the contract is not met.
Unsecured lending can carry a higher interest rate because the lender does not hold the same vehicle security. It may also suit purchases that do not meet a secured lender’s vehicle-age or condition rules.
- Compare rates and fees for the same amount and term
- Check vehicle age and condition criteria
- Understand default and enforcement consequences
- Confirm whether early repayment fees apply
Choosing between them
There is no universally better structure. The relevant choice depends on eligibility, the vehicle, price, term, flexibility and total cost. BaseRate does not provide personal financial advice; consider the contract and seek independent advice if you are unsure.
Sources and further reading
Primary sources checked when this guide was reviewed:
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