So you’re in the market for a new ride and need a hand paying for it. You start your research journey and keep seeing ‘secured’ and ‘unsecured’ loan options. Not entirely sure what the difference is? Let us break it down.
What is a secured loan?
You can think of a secured loan like a loan ‘with security’ – which means the asset, for example the car you buy, is used as a type of guarantee against the money you borrow from a lender.
Another common example of a secured loan is a home loan or mortgage.
In some cases, lenders may consider a secured loan where they wouldn't consider an unsecured loan. Depending on your situation, they may also be able to provide lower interest rates compared to an unsecured loan.
From a lender’s perspective, a secured loan is typically considered less risky than an unsecured loan. This is because if something were to happen – worst case scenario! – the lender technically has the right to sell the asset you put up as security (like your car) to recoup its money. But don’t stress, as long as you’re responsible and make your repayments on time, you’ll be just fine.
If you don’t know your credit scores, it’s a good idea to check them here on WisrCredit to understand your borrowing power.
What is an unsecured loan?
An unsecured loan means you’re borrowing money for a specific purpose and you’re able to get approved because of your “credit-worthiness”. It’s different from a secured loan since the lender does not have rights to an asset (like a car or house). Some common examples of unsecured loan purposes are: weddings, travel, home renovations and debt consolidation.
Credit card debt is the most common form of unsecured debt. Other unsecured debts include personal loans, gym memberships and medical bills.
An unsecured loan may be used to help consolidate your debt or help you reach specific goals. You should however feel comfortable and in a secure position to meet regular repayments without feeling burdened by them.
Check out our recent post on questions you should be asking if you’re considering applying for an unsecured personal loan, especially during COVID-19.
Wisr now offers secured car loans! 🎉
If you’re in the market for a new ride and are considering a secured car loan, Wisr offers great low rates for strong credit. You can learn more about what we offer below. Happy driving!