Applying for unsecured car loans is ideal for individuals who do not have a lot of collateral to secure a loan. An unsecured loan is a promise to pay between the lender and the borrower and may be a good way to purchase a new or used car. The lender will weigh many factors to determine the creditworthiness of the borrower, and on the basis of those factors, offer an unsecured car loan with terms, conditions and rates that are specific to the borrower's situation.
Finding lenders that are willing to make unsecured car loans requires some searching on the borrower's part to determine the best rates. Not all lenders are the same when it comes to unsecured car loans, and it is important to look for certain features in the loan, such as loan qualifications, the annual percentage rate or APR, and other conditions.
An easy way to search is by conducting a keyword search in any major search engine. This will provide lists of companies that are willing to extend an unsecured loan based on your situation. These loans can be made to people with good credit, bad credit, low or no credit. The requirements for these loans will vary and only with a thorough search can you find the best lender for yourself.
You can talk to friends, relatives and co-workers that have recently completed the car-buying process to determine who has come across a lender with a good unsecured car loan program. This word-of-mouth approach is helpful in getting a good recommendation and knowing what to expect through the borrowing process. You are going to hear a better balance of pros and cons than if you simply rely on the lender's website.
When possible, try to work with lenders that know and understand the local car buying market. Although many companies, particularly online, have a national scope, local lenders know the dealers and the cars being sold and are going to help you match your needs as a buyer with the right seller.
An unsecured car loan represents a promise to pay that is not backed by any collateral requirement. As such, the lender is exposed to a greater credit risk than what they have for a secured loan. Accordingly, the lender will impose certain qualifications that are unique to unsecured car loans, such as:
These factors are important because their recourse in the event of loan default is limited. Some lenders will extend loan terms to people with bad credit understanding that the interest rates, fees and charges, known collectively as the annual percentage rate, is much higher on these loans than for a comparable secured loan.
Knowing where you stand before applying for a loan and where to go to locate the right lender will help you secure the best unsecured loan.
