How to get an unsecured car loan

Find financing that isn't tied to your vehicle's price tag.

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With an unsecured car loan you won’t risk losing your car and can often borrow more than the car’s value to cover other costs like registration. But such loans can be hard to find and you’ll need good credit to qualify.

LoanConnect Car Loan

  • Min. Loan Amount: $500
  • Max. Loan Amount: $50,000
  • Interest Rate: 4.6% to 46.96%
  • Loan Term: 1-5 years
  • Pre-approval in as quick as 60 seconds
  • Quick and simple financing
  • Safe and secure loans
  • All provinces

LoanConnect Car Loan

Get access to 25+ lenders through Loan Connect's brokerage, and receive pre-approval in as fast as 5 minutes, and financing up to $50,000 in as little as 24 hours from the time of your application.

  • Min. Loan Amount: $500
  • Max. Loan Amount: $50,000
  • Interest Rate: 4.6% to 46.96%
  • Loan Term: 1-5 years
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How do unsecured car loans work?

An unsecured car loan works like a personal loan: you don’t have to put up any collateral and therefore can borrow more than the value of your vehicle. You can borrow more to cover insurance, additional costs or anything you need.

However, you may also be subject to stricter eligibility criteria, like good credit, but your car likely won’t need to meet any criteria.

Compare unsecured car loans

Name Product Min. Loan Amount Interest Rate Fees Loan Term Min. Credit Score
LoanConnect Car Loan
$500
4.6% to 46.96%
Varies by lender, loan type and province
1-5 years
420
Get access to 25+ lenders through Loan Connect's brokerage, and receive pre-approval in as fast as 5 minutes, and financing up to $50,000 in as little as 24 hours from the time of your application.
Auto Arriba Car Loan
$3,500
8.99% to 29.50%
Contract fee of $499.00
1-7 years
N/A
Auto Arriba offers car loans starting at $3,500 up to $50,000, with as little as a 30 minute loan turnaround time.
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Compare up to 4 providers

Name Product Min. Loan Amount Interest Rate Fees Loan Term Min. Credit Score
Ferratum Personal Loan
$2,000
18.9% - 54.9%
None
1- 5 years
N/A
Ferratum provides Canadians in need of quick cash with loans for car purchases from $2,000 to $10,000 for 1 year to 5 years.
Fairstone Personal Loan (Unsecured)
$500
26.99% - 39.99%. Varies by loan type and province
None
6 months - 5 years
N/A
Fairstone offers unsecured personal loans up to $20,000
LendingMate Personal Loan
$2,000
43% (British Columbia and Ontario) and 34.9% (Quebec)
None
1-5 years
N/A
LendingMate offers loans to Canadians with poor credit with no credit checks. Guarantor required for application.
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Compare up to 4 providers

*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

What rates can I expect on an unsecured car loan?

You can apply for an unsecured car loan with a fixed or variable interest rate. Each one of these comes with its own pros and cons. Consider your financial situation to see which suits you best.

Fixed interest rate.

This means that the interest rate you pay on the car loan won’t change for the duration of the loan. You’ll know exactly how much you have to pay each month. If your loan term is five years, adjust your budget without worrying about fluctuating costs. Click here to read more about fixed rate car loans.

Variable interest rate.

This means that the lender can change the interest rate at any time, depending on the prime lending rate, which is determined primarily by the Bank of Canada and also by major banks. The prime lending rate is impacted by the economy and can fluctuate, thus changing your interest rate throughout the course of your loan term.

If prime is low enough, your interest rate could be lower than it would be with a comparable fixed rate loan. However, if prime rate happens to raise, you could be stuck paying higher interest fees than you would with a fixed rate loan. Basically, it’s a gamble – you could win sometimes, but you could lose sometimes too. Click here to learn more about variable rate personal loans.

Three factors to compare on unsecured car loans

The most important part of picking a lender is comparing the loans you’re offered. Here are some quick tips to help you focus your decision:

  • Check out the interest rate. Every loan offers a unique interest rate. Even if you have the best credit and a superb history, you may not be eligible for the lowest rates from certain lenders, so save yourself time and frustration by getting pre-approval loan offers in order to compare rates between lenders.
  • Consider the fees. Does your lender have an origination fee? A fee for paying off the loan early or for making extra payments? These stack up and add to the total cost of your loan. Find a lender with minimal fees so you can spend more on getting the car that you want.
  • Find the APR. The APR (Annual Percentage Rate) is the final cost of the loan. It reflects the total cost of your loan over the course of a year including interest, fees and all costs associated with getting the loan. By comparing the APR of different lenders, you’ll see how much one loan could cost you when compared to another.

The benefits and drawbacks of an unsecured car loan

  • You don’t need to provide collateral against your loan, which means the application process is generally faster.
  • The loan amount is more flexible because you can use it however you like, including for multiple purposes. For instance, you could take out a larger loan to cover debt consolidation and to finance your car.
  • The lender can repossess your vehicle and choose to take your case to court if you default on your repayments.
  • The interest rates are almost always higher than secured car loans because there is more risk for the lender.
  • Because the loan has a higher risk, you may be eligible for a smaller amount than with a secured loan.

Be cautious of overborrowing

If you borrow more than the cost of your car in order to have a little extra, be careful not to apply for more than you can afford. Work out a budget to ensure you will be able to afford your repayments. Unsecured personal loans tend to come with higher rates than secured car loans, so take this into account when submitting an application.

Should I buy any dealer extras?

When you have an unsecured car loan, you can use your funds to purchase more than just the car. Dealer extras can be a good deal if you know what you’re getting and what you want to avoid. However, it’s often not worth it since you can often get the same service elsewhere for cheaper — if it’s even necessary at all.

You might want to avoid these dealer add-ons

Here is a list of common dealer extras and when you might not want to go for them.

  • Rustproofing. It may not be worth getting this done at the dealer unless you’re buying a used car. This is because many modern manufacturers will seal the car against wax and keep in under warranty for five to ten years.
  • Fabric protection. Generally not worth it. You can buy fabric protector and do the job yourself for much cheaper than the dealer’s price.
  • Paint protection. Much like fabric protection, you can do this yourself with a can of wax or have it done later for much less than what a dealer is offering.
  • Extended warranty. New cars usually come with a manufacturer warranty, but if you’re buying a used car, opting for an extended dealer warranty can cover any unexpected expenses after your purchase.
  • Prepaid maintenance plans. This depends on the car you’re buying. If you’re picking up a clunker or a car with an incomplete owner history, a prepaid maintenance plan may be worth the money. Otherwise, you might want to skip it.
  • Extra tinting. Most cars come with some tinting, and it’s usually cheaper to have extra tinting done elsewhere.
  • Extra insurance. Most policies, like GAP insurance, that are sold by dealers are usually unnecessary. Unless you’re prepared to pay a premium price just in case something happens, you may want to skip extra insurance.
  • Headlight protectors and towbars. If you know the dealer is offering a good deal, go for it. Otherwise, you can likely have them installed aftermarket.
  • Nitrogen inflation. Nitrogen inflation does have performance benefits, but you’re unlikely to notice. If you really want it, you can save money by having it done somewhere else.

Bottom line

An unsecured car loan can be a quick way to finance your next vehicle, but it comes with its own risks that you’ll need to understand before you borrow. Compare your rates and read up on personal loans so you can make the most informed decision.

If you’re interested in a traditional auto loan secured by your vehicle purchase, you can visit our page on secured car loans to compare lenders.

Frequently asked questions

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