Secured Loans

Car Secured Loan

A car secured loan may be the answer you are looking for if you wish to purchase a new car in the UK but are unsure that you can afford the outright. Driving is essential to the way people live in the UK but it is also an expensive element with all kinds of important hidden costs to consider. The price of a vehicle does not begin and end when you hand over the cheque at the dealership - it extends to things like insurance, repairs, damage, security and the ever increasing cost of petrol. With all those things to consider it is unsurprising that many people, particularly those buying their first car, decide to take out a secured car loan deal in order to make the purchase.

Traditionally buyers used an unsecured loan for this purpose, the thinking being that you are better off in a situation where you are not backing up the credit with any form of collateral. However, unsecured borrowing is limited in a number of ways and many borrowers find it does not allow them to get the vehicle they want and restricts their finances by putting high pressure on them to pay the loans back straight away. That's why more and more people in the UK are now getting a car secured loan for their motor purchase.

The Benefits of Secured Lending

There are many benefits to taking out secured credit as opposed to the unsecured kind that one should consider if they are trying to raise money fast. First and foremost there is the capital amount you will get. Unsecured lending generally comes with a pretty low value so it is probable that the amount of money you get will not be enough to cover the cost of the vehicle you want to buy.

Also, because the lender is given the security of the asset you have put up as collateral they will be much more likely to afford you a shorter term for repayment. Many people who get an unsecured loan find the quick turnaround in repayment structure to be almost impossible to deal with. Couple this with the high rates of interest that comes with unsecured credit and you have got a very unfavourable set of circumstances. A car secured loan, on the other hand, has low interest and long terms of repayment so you don't need to worry about being stung by the sudden need to pay back the lender.

The Disadvantages

The main con in all of this is, of course, the fact that the lending is secured and, therefore, you are putting something at risk in the deal. Once you have put up collateral it is no longer the case of your credit being at risk but your property too and you need to weigh that up against the value of what you are buying. The car purchase you make has to be planned carefully in order to make the agreement worth your while. This takes some smart planning.

Making a Budget

As the risk is great with a car secured loan you need to draw up a tight, realistic budget which takes into account as many of the relevant variables as possible. Consider the term of your loan, the interest rate, the money you will require to keep the car running and secured and the asset that is on the line. The numbers here need to add up and if there is a relatively high risk that you will default it is inadvisable that you go ahead with a car secured loan.

If the budget works out, however, a car secured loan is a great way to raise the quick cash to purchase your vehicle. Deciding on the collateral will be a big part of making the budget work. The two main options borrowers have in this situation is either their home or the car itself.

A loan secured with the car can be the most logical as, obviously, the value of the asset is equal to the loan and so there is little revaluation to deal with. Your home may be the most valuable thing you have and therefore will fetch you the best terms on the deal but is it something you really want to put up for grabs in such a high risk agreement? Answering that can only be done by making a realistic budget and being sure it works out over the whole course of your term.

More and more people in the UK get a car secured loan to purchase their vehicle. Though risky, a car secured loan comes with many benefits that are worth considering. Having the agreement secured like this means higher sums of capital and better terms on repayment. So, consider a car secured loan for your motor purchase. It might be the best move for you.