A secured loan is a type of loan where collateral is provided in exchange for a loan. The collateral, in many cases, is the item that the loan is taken out for. For example, on a home loan the collateral is the actual house. If the borrower does not meet the loan terms, then the house can be repossessed by the mortgage lender. In many cases, this is also true on auto loans. The collateral on a car loan is the actual car that the loan has been taken on. When a borrower fails to make their agreed-upon repayments, the lenders can repossess the vehicle. However, you are also able to take out a personal loan for a particular purpose and use your vehicle as security.
Requirements For A Secured Loan
If a lender requests collateral on a loan, then the borrower must own the property that is offered. In many cases, however, the collateral on a secured car loan is the actual vehicle. Following is a list of items that will be required by the lender.
Income: A borrower is required to have verifiable income. That can take the form of providing paycheck stubs from several of your most recent pay periods, tax return copies for self-employed individuals, or bank statements showing regular monthly deposits if you have other income sources.
Employment: You will be required to show a steady income source. For most individuals that will be some type of employment. Generally speaking, lenders prefer applications to show that the applicant has been steadily employed for at least the past 12 months. However, for individuals who are self employed or people who have other income sources (inheritance, spousal supports, etc), if you can demonstrate that you have a predictable and steady income, then a majority of lenders will be willing to work with you.
Residency: Lenders, in many cases, will want applicants to be able to show steady residency and to have lived in their current home for at least 12 months. However, if you have recently moved residence, you may be able to show that you previously lived in one place for at least 12 months during the past several years.
Advantages Of Loans Secured Against Cars
For people who own their vehicles, it maybe an option to get a loan secured against your vehicle and get the best loan terms and interest rates that a lender offers. Apart from the liability associated with linking an asset or property to the loan, there are significant and specific advantages that are offered with a loan secured against your vehicle.
Flexible terms. Due to the fact that the lender is given collateral against the loan, borrowers that take out a loan secured against a vehicle will enjoy more flexibility when it comes to payment terms. More flexible terms might result in the borrower saving money since the individuals will have better control over when and how they pay back their loan.
Lower income requirements. Once again, with the loan being secured against collateral, in general the lender will not be as stringent on your income level. This is why loans secured against vehicles are ideal for prospective borrowers who might have maturing investments or significant freelance income, but not steady paychecks from employment.
Lower interest rates. So much of the shopping process for personal loans is taken up by searching for the lowest interest rates. However, as your as using a vehicle as collateral, you will most likely receive a more generous interest rate.
Safety and Security. As long as borrowers do not default on their secured loan, you can save money over the period of the loan. That is why, during times when credit is hard to get and lenders are being very conservative, opting to secure a loan against your vehicle provides the lender with more comfort and security.
Check on the penalties. If you fail to make your payments on time on a loan secured by your vehicle, then your vehicle might be repossessed. Check to see what specific terms that your loan offer includes to find out how many payments need to missed, in addition to how much the penalty fees are. Don’t take out a secured loan if there is a possibility that your financial situation might cause you to end up losing your car. That will damage your credit and end up costing you money.
Weigh the benefits. Given that there is less risk on loans secured by vehicles for lenders, they might offer benefits that you would not usually get. Check through the loan offers and search for extended repayment periods and low interest rates offered due to it being a secured loan. Depending on what your credit is like, you might be eligible to receive additional benefits such as not being required to make a down payment.
If you are in need of fast cash and have a vehicle you can use as collateral, then applying for a loan with LoanOne is the way to go. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal loans and business loans that can be secured with a vehicle with very competitive rates. Our loans are fast, flexible and can be tailored to both your personal or business needs. Apply now!