CAR FINANCING OPTIONS

SECURED LOANS V/S UNSECURED LOANS

Our search for car financing options often ends up in a complex crossroad where we need to make a choice between an unsecured car loan and a secured car loan.

Car loans have helped a number of people in buying their dream cars without actually worrying about their financial condition.

PROMISSORY NOTE

A secured car loan always spells out specifically the kind of vehicle being utilised for collateral. Here, the promissory note lists the car’s make, vehicle identification number and year of manufacturing.

Information like the measurements of the car and its colour are also mentioned clearly. However, there’s no such present in case of an unsecured car loan.

REPOSSESSION

When you do opt for a secured car loan, the bank can easily repossess the car in case you don’t make your payments regularly.

After the possession, the car is sold at a higher price to another individual. Due to the absence of any collateral security in unsecured car loans, the possession of the car remains with the original owner.

Car repossession can prove to be quite damaging for your credit ratings. Your CIBIL’s credit report might get entirely spoiled if your car is repossessed by the bank and sold at an auction. This is where secured loans can prove to be quite risky for the borrower.

If you’ve got any financial concerns, then you should consider taking up an unsecured car loan.

CREDIT SCORE REPORT

JUDGMENT

As soon as an unsecured car loan goes into default, the lender starts to take some legal actions for acquiring a judgment.

The bank could then take a small portion of your paycheck for covering up the cost of the loan.

INTEREST RATE TYPE

Secured loans are usually accessible as fixed rate loans and the advantage is that your repayment sum remains exactly the same because there’s no change in the interest rate.

An unsecured loan, however, can have a variable interest rate and so your principal amount might change from time to time.

LOAN TENURE

Secured loans have shorter loan tenure and so the risk involved here is pretty less. On the other hand, unsecured loans are meant for long term uses and, therefore, the risk also is quite huge.

These are some of the major points of differences between secured loans and unsecured loans. You could choose any one of these options to buy your dream vehicle.

References:

www.bankbazaar.com

carloansinindia.wordpress.com

carloaninterestrate.blogspot.in

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