Ever wondered what the difference is between secured car loans and personal unsecured car loans and how that difference affects your finance and your repayments. Basically the difference is small in terms of the car loan details themselves, but is bigger when the true cost of each is taken into account.

Before we get into the nuts and bolts of car loans packages , let’s first have a look at the a range of machinery that determine the cost of your loan and of your monthly repayments. The coat of the finance is the total you repay less the sum borrowed. Hence, let’s say you are repaying $20,000 at 12% interest rate over 36 months; you will pay back at the rate of $664.29 per month. That would total a repayment of $23,914.44, and the cost of the loan would be $3,914.44 plus any set-up or administration fees. A finance calculator will assists in calculating these figures to calculate the real costs of car finance.

An choice to a car loan would be car hire purchase (HP), where you hire the car over the repayment period and obtain the owership papers to the vehicle with your final payment. Until then the car belongs to the HP company.

However, most finances are either secured or unsecured, and not all loan companies offer unsecured car loans so let’s look at car loans that are secured first. A secured car loan is one whereby the lender offers the loan with the car as security. If you fail to make payments, the lender can sell the car to recoup their money. It could be probable to get a secured car loanwhen the motor vehicle gets past a certain age, often 7 years, but the finance term could be shorter than 5 yearsor not at all by using your home or some other form of security. These are not exactly classed as a car loan. normally the car is used as security over the loan.

Secured car loans can include on-road expenses such as the registration, loan protection insurance for disability,death or unemploymentand comprehensive auto insurance as part of the financing deal. Loan protection insurance makes sure that the finance is paid off in the event of your death during the loan period, and car insuranceis needed to make sure that the car is in good condition should it be needed to repay the lend in the event of you defaulting on your payments.

This might all sound like doom and gloom, but these are standard conditions for any secured loan, not only car loans. You can get car loans secured for a period of one - seven years , and the interest rate will be lower than that for an unsecured car loan where the financier charges extra to compensate for their added risk. If you put deposit or trade amount off the finance this will lower the repayments, or a shorter term, whichever you prefer.

Some car loans can come with an option to have a balloon payment, which is an amount borrowed where you pay interest only and finalised the principle when finalising the loan. This is popular by those whose income will increase over the period, and they will be in a better financial position to pay a lump sum in 3 - 5 years time. This too results in either a cheaper repayment per monthor a shorter repayment term.

If you are looking to purchase a used car, your finance package will be priced differentlyaccording to the car finance company and the age of your car. Many will charge higher car loans interest rates, and the current credit problem has changed the outlook of many lenders to unsecured car loans in particular. Many no longer offer personal loans due to the increased risk in the current economic climate.

However, they are still available, and some car loan brokers can put you in touch with a choice of lenders that are still willing to offer you an unsecured car loan. In addition to the car loans interest rates, you should also evaluate the fees charged, since they can involve a considerable outlay for you before you get the loan.

The most important differences between secured and unsecured motor loans, therefore, can be summed up as:

Secured car loans are cheaper to repay, with in general lower rates.

Secured loans demand fully comprehensive car insurance, while unsecured loans do not.

Both finance packages could require life insurance cover for the finance, but secured loans are more likely to.

You can sometimes include comprehensive insurance, registration and other expenses in the secured loan, but with an unsecured car financing you must include the the outlay on top of the amount borrowed.

Fees for unsecured loan package can be noticeably higher than for secured loans.

Not all car loan lenders will offer unsecured car finance.

There few doubts that if your vehicle is young enough to be given a loan with the motor vehicle as security, then that should be your option. You might be able to arrange a secured loan for an older car with your home as security, but you will have to make sure to maintain the repayments since lenders are becoming unsympathetic in the current economic climate.