An unsecured loan is a loan that is not secured against an asset. For this reason, unsecured loans are considered to be high risk by lenders as there is no guarantee that they will be able to recover the debt if the customer fails to make their monthly payments.
Unsecured loans are usually only available to those with an excellent or very good credit score and a good income. When you take out car finance, the loan is always secured against the car, meaning that even customers with a bad credit rating are able to get car finance at a competitive rate.
Choosing an unsecured loan means that you don’t have the risk of having the car you’re financing being repossessed. However, should you be unable to pay back your loan, you will still need to find some way to make the payments. If you do feel that you are going to have difficulty repaying your finance package, the first thing you should do is contact your lender and see what assistance they can provide.
It is important that you shop around when looking for an unsecured loan. As they are only available to those with a good credit score, you will want to ensure that you find a deal that is right for your credit circumstances.
If you apply with Creditplus, we can compare over 100 lending options to match you with a car finance package that suits your circumstances. If you are ever in doubt about your options, you can always contact one of our customer advisors and they will be happy to answer any questions you have.