Simplify Secured Car Loan
From 6.5% p.a.
- Borrow up to $500,000
- Min. loan amount: $5,000
- Loan term: 1 to 5 years
- Establishment fee: $100-$500
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Whether you’re purchasing a new or used vehicle, you may be able to use the vehicle as a guarantee to take advantage of a lower interest rate. Find out what you need to know about secured car loans in this guide.
A secured car loan is a loan where the funds provided are used to purchase a vehicle, then used as security against the loan. Of course, the car you buy needs to be in good condition, so lenders usually require the car to be new, but you can find secured car loans for used vehicles.
You can also use some secured car loans to refinance an existing secured loan from another bank.
Secured loans can offer you a lower rate of interest because the lender has less of a risk. However, if you default on the loan, the car you purchase is repossessed by the lender.
There are several standard differences between these two types of loans:
There is a range of secured car loans available from various lenders. Finding the best-secured car loan depends on different factors, for example, your financial situation and the length of the loan you require. But there are some other factors that you can use to determine the merit of the loan:
The interest rate of a loan determines what your repayments are and differs significantly between lenders. Comparison rates incorporate the total cost of the loan, so ensure you compare this before you apply with a loan provider.
Once you accept your loan, these can include establishment fees and ongoing costs, such as loan service charges. Compare fees—as well as the interest rate and loan features—to make sure you get a good deal.
Lenders set specific loan terms—usually between one and seven years—that you can select. Make sure the lender lets you repay the loan within a period that suits your budget.
A typical minimum loan amount is $3,000, while the maximum amount varies between lenders. Some lenders don’t have a maximum borrowing amount and consider it on a case-by-case basis. Bear this in mind depending on what car you wish to buy.
Some lenders let you make extra repayments to pay off the loan sooner. If you think you can put more money towards the loan, then ensure you include this feature in your comparison. However, bear in mind that some lenders charge fees if you pay off the loan earlier than expected. So, if you want to do this, look for a loan that won’t penalise you.
Loans come with various features to help you manage them better. For example, some lenders offer discounted insurance products with its loan, and others provide vehicle finding services.
Although using your new car as security has its benefits, it also means the lender can take it away if you default on your loan. So be sure only to take out a loan that is manageable with repayments you can meet.
If you do not familiarise yourself with the fees associated with a secured car loan from a particular lender, you may end up paying more than you thought. Some lenders have lower fixed interest rates but higher monthly fees, which means you end up paying more anyway. Make sure you’re aware of all aspects of the loan by reading the terms and conditions.
It’s common for people to choose a loan that they regret in a few years. However, you could be paying off this loan for a while, so make sure you consider possible changes in your financial circumstances. For example, you may receive a promotion and want to increase your repayments to pay off your loan sooner, but your lender may not allow this. Make sure you check all the limits of the loan and its flexibility. If the loan doesn’t meet your needs, you may want to refinance with another lender.
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