If you’re thinking about purchasing a new car but having difficulty affording the payment, an unsecured car loan could be your perfect solution. This type of financing is available to those with good credit who can contribute either as a down payment or co-signer.
Unsecured loans carry greater risk for lenders, but they may offer lower interest rates than secured ones. To find the most affordable unsecured loan rate, shop around and find a lender who provides this type of product at your affordability level.
No Collateral Required
Unsecured car loans don’t require you to pledge an asset like a house, car or other valuable item as security for the loan. However, if you miss payments or fail to pay in full by the due date, your lender has the right to take possession of the property/vehicle and report it to credit bureaus.
Your bank or credit union may offer an unsecured auto loan, while online lenders provide personal loans without collateral. But before making a decision about which lender is right for you, make sure to get pre-approved so you know the kind of deal you qualify for before purchasing your next vehicle.
Though you can use your current home as collateral for an unsecured auto loan, lenders typically prefer borrowers who possess the security of a steady source of income. Therefore, if you’re a freelancer, an emerging entrepreneur or a mature investor who doesn’t possess traditional sources of steady cash flow on paper, qualifying for this type of loan may prove more challenging.
No Eligibility Requirements of the Vehicle
An unsecured car loan is an excellent financing solution for those searching to purchase either a new or pre-owned vehicle. These loans are determined by your overall credit score and history.
When applying for an unsecured auto loan, the bank issuing it will issue you a check that can be used to purchase your desired car at either a dealership or private seller as cash buyer.
Your lender will also check your credit to assess if you qualify for financing. Oftentimes, lenders reserve their best interest rates for applicants with excellent credit scores.
Lenders require proof of income in addition to your credit score. To do this, they will require copies of your paycheck stubs, federal tax returns and bank statements with regular monthly deposits.
Low Interest For Good Credit Score
A good credit score can offer you a low interest rate on an unsecured car loan, which may be available from local banks, online lenders or credit unions; however, you may need to shop around for the best rate. Your score is determined by how consistently you pay back debts such as retail accounts, installment loans, credit cards and mortgages on time.
A good credit score can mean better deals on other financial products. For instance, some cards might offer 0% interest rate on balance transfers for the initial few months of your account, helping you pay off high-interest debt faster. Furthermore, top credit cards provide other perks and promotions like free rental insurance or discounts on services like auto insurance, credit cards and home improvement supplies. It’s important to find a card that provides all these features at a price point that works within your budget.
Quick Access to Funds
If you need cash quickly for a purchase, unsecured car loans provide easy access. Many lenders provide loan proceeds both online and in person; many even provide same- or next-day funding options.
Unsecured personal loans are an ideal option for buyers with excellent credit who wish to make a large purchase. With this type of loan, you have the flexibility to find the ideal vehicle and negotiate price without jeopardizing your credit score.
If you have leftover cash from a car loan, it can be tempting to use it for whatever you please – such as debt payments, savings or even future car repairs. However, remember that this money remains a debt to your lender so be sure how much of your payments are covered by these additional funds before making decisions. Using these funds for other higher-interest debt or saving for future car repairs could help manage your financial goals in the long run.
