Unsecured car loans
An unsecured car loan is a personal loan used to buy a car. The lender decides on your income and credit history alone, and charges more for the extra risk.
- The car isn't security, so it can't be repossessed, though the lender can still take legal action to recover the debt.
- Any car, any age, from any seller.
- Higher rates, lower limits and usually shorter terms.
- Best suited to borrowers with good credit.
Secured car loans
A secured car loan uses the car you're buying as security. If you can't repay, the lender can repossess and sell it.
- Lower rates, and often terms of up to seven years.
- Higher limits, so you can borrow more.
- Easier to get approved with average credit.
- The lender may limit the car's age or type.
Which is better?
If you're happy for the car to be security and want the lowest cost, a secured loan usually wins. If you're buying an older car, or want no lender's interest in it, an unsecured loan may be the better fit. Compare the comparison rate and the total cost over the term.