Why Choose a Secured Loan?

We at Flatiron Finance want to make sure that you understand the different terms associated with loans and refinancing your car—we know that it can seem quite complicated at times.

Specifically, this month’s blog is dedicated to helping you to understand the difference between a secured loan versus. an unsecured loan.

Secured Loan vs. Unsecured Loan

First of all, a secured auto loan, or simply “a secured loan,” is a loan taken out with collateral (and sometimes, the “collateral” is the item the loan is being taken out on) in exchange for the loan. For example, collateral for a secured car loan is the car itself. Accordingly, if the borrower is unable to meet the terms of the loan, then the car is repossessed by the lender.

“Unsecured loans” are loans that are offered without any collateral offered in exchange. Examples of unsecured loans include student loans, most personal loans and credit cards. If the borrower isn’t able to make payments and meet the terms of the loan, the lender then has to collect the loan via collection agency or may sue for the balance owed to the lender by the borrower.

Why Choose a Secured Loan?

Best Interest Rates

Secured car loans usually get you the best interest rates and loan terms when compared to an unsecured loan, especially for people who own their homes, have to pay a mortgage, or have other large assets. In addition the liability of linking a property or asset to an auto loan, the secured auto loan offers specific and significant advantages.

Secured Loans Have More Flexible terms.

Because the lender in a secured loan situation has collateral to balance a loan against, those taking out secured auto loans can enjoy more flexibility with their payment terms. These flexible terms translate as more savings for the borrower as they can have better control over how the loan is paid back in the long term.

Secured Loans Have Lower income Requirements.

As before, because the car loan can be secured against collateral, a lender is generally more flexible about requiring a specific income level for a borrower to be eligible for the loan. This is another reason why secured loans are great auto loan options for potential buyers with a less traditional income setup (such as freelance, investments, etc)

Secure Loans Mean Lower interest rates.

The search for low interest rates on an auto loan is usually a huge piece of the loan shopping process. Secured auto loans usually mean lower interest rates, again, based on the fact that collateral is available to the lender. While loan shopping, a potential car buyer should take a good look at all of the APRs, or annual percentage rates, offered by lenders to find the lowest ones that will not lead to the debt growing over time with a lot of compounded interest.

These are just a handful of reasons why getting a secured loan can help you.

Call Flatiron Finance today and learn more!

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