Secured or unsecured?
Credit providers will offer both secured and unsecured loans. The two do differ and it is important that you know the difference.
- The loan is secured by an asset such as the car itself, which can be repossessed if the loan goes unpaid
- Will generally have a lower interest rate
- Higher chance of approval.
- No security assets or valuable items required to secure the loan
- Will generally have a higher interest rate
- Lower chance of approval.
Fixed or variable?
A fixed interest rate loan is where the interest rate does not change for the period of the loan. This means your regular repayments will stay the same for the entirety of the loan.
A variable interest rate loan means the interest rate may change throughout the period of the loan. This means it may drop, and your repayments will become cheaper. However, it also means that it could rise, and therefore your repayments could become more expensive.
Always be careful! The lowest interest rate may not necessarily mean the lowest repayment. Always check to see if the loan has hidden or additional charges, making your loan more expensive.