Secured Loans

Secured Car Loans

Secured car loans may be a good option if you are looking for some credit on which to purchase a car but are not sure if you have the credit rating to apply for unsecured loans. Cars are essential to how we live and work in the UK. In many ways your first auto purchase is as influential on your life as your first home purchase. It is a large scale expense and many people find it difficult to purchase a car outright when they first start driving. If you are in this situation you probably will consider taking out secured loans in order to purchase your vehicle.

Credit forwarded to people in order to purchase cars is generally unsecured, as in it is forwarded without the backing of any form of asset. Though unsecured debts is generally preferred to secured borrowing as it is considered less risky, it is also more difficult to come by and generally does not net as much capital as secured lending. Therefore, those who either cannot get an unsecured loan that is large enough to get the vehicle they want or are unable to borrow without some kind of security, may want to consider what secured car loans can do for them.

Advantages of Secured Lending

The greatest advantage of taking out a secured car loan is that you will be forwarded a larger amount at a lower rate of interest. While unsecured loans may give you the peace of mind that none of your property is being risked, they also come with often crippling rates of interest which make the overall deal unaffordable. It is easy to be enticed into unsecured lending by the promise of low risk credit but, should interest rates rise, you can find yourself in all kinds of trouble repaying the debt.

Secured car loans present less of an interest risk as the asset you have used to back the agreement is reassurance enough for your lender to keep the interest at a low rate. Also the term for repayment is generally set much longer because, once again your lender will be more comfortable giving you time due to the item of collateral. This is, however, where the potential risk factor arrives. If things go wrong with your payments whatever item you held up to secure the car loans now liable to be the property of the lender.

Collateral

Secured car loans come with these great benefits purely because of the item you have used as security. Choosing what this will be is going to take some planning and consideration. Remember, should you default you are facing the very real possibility of your property being seized by your lender so be sure that the budget you have made out for repaying the debt is realistic and sensible. The asset you wish to back the lending with will need to be something that can match the value of your repayments, so you are really looking at something with a lot of intrinsic worth.

Many borrowers looking for secured car loans offer their home as collateral and this has its pros and cons. On the plus side your home is of great value so you are likely to attract some pretty favourable terms on your agreement. On the negative side defaulting on your agreement is putting your home itself at risk. Other borrowers will allow you to use the car itself as collateral for secured loans and this can be a pretty advantageous circumstance for both parties. There will be no question of the value matching the capital as one will, logically, match the other.

Defaulting

What makes secured lending so potentially troublesome is that defaulting means your car or whatever other asset you backed the deal up with may be taken away from you. It is important, therefore, to know exactly what the rules governing this element of secured car loans are. In truth a lender has the right to seize property used to secure secured car loans after a single missed payment. In truth this rarely happens and your lender will usually give you three to four months to repair any arrears you have built up on accounts. The message is, however, that if you are taking on asset backed debt be sure that you have a solid, intelligent budget with which to clear it in future.

Secured car loans may be a good idea if you are looking for a high cost vehicle that you would prefer to pay for over the number of years. There are various loans you can purchase in the UK for different purposes. Secured car loans are one of the best ones to get if you wish to purchase a new vehicle.