There are a couple of similarities and quite a lot of differences between a secured loan and an unsecured loan. Both types of loans are a fixed interest rate loan that can be taken out over a short period of time or extended out to a longer period to reduce repayments. Both can be used to purchase a vehicle, equipment or leisure craft, but that is where the similarities end.
Unsecured loans are usually paid straight into your bank account, and can be used for whatever purpose you require. Secure loans are paid directly to the person or dealer who you are purchasing from and the vehicle is then used as security against your loan, meaning that if you are in default of your loan agreement they are within their legal rights to re-possess the vehicle.
As the lender has this extra security, there is less of a risk to the lender of losing money which is why you will find secure loans generally attract a much lower interest rate than unsecure loans.
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If you wish to sell your vehicle, equipment or leisure craft during the loan period you can do this at any time with an unsecured loan. With a secured loan you will need to pay off the loan at the time of sale, so if the loan payout is more than the sale price you would need to pay off the difference to finalise the loan.
Secure loans are the cheaper option in most cases, but there are certainly a number of situations where it makes more sense financially to obtain an unsecured loan.
Speak to an expert today at SaveOnCarLoans.com.au to work out what type of loan suits your needs. Call us today on 1300 000326 and start your application with us.