Car loans are easily one of the most significant purchases most people will make in their lifetime, so it’s essential to know how to shop and find a good deal. This article describes what you need to know about a secured car loan and how you can use it to shop for the best available rate.

What is a Secured Car Loan?

The Secured car loan is a type of loan you can use to purchase a vehicle. The loan is collateral-based, meaning the lender requires you to provide security before they give you the loan. This security can be anything from a guaranteed asset like your home to an equity stake in the car dealership where you plan on purchasing your vehicle.  

Secured Car Loans: What are the benefits?

The benefits of securing a car loan through collateral are apparent. If you don’t have enough money to afford the entire purchase price of the car outright, using a secured car loan allows you to buy the vehicle without risking your financial stability. Additionally, if you do not make your scheduled payments on time, the lender can repossess the collateral and sell it at auction, which would result in significant financial damage.

What are the downsides to a secured car loan?

When a person takes out a secured car loan, they are essentially locking in their car financing terms for a set period of time. This type of loan has some distinct advantages but has a few downsides. 

For starters, secured car loans tend to have higher interest rates than unsecured loans. Additionally, the length of time that the loan is locked in can be an issue if the driver decides they want to sell or lease their vehicle within the specified term. They could face significant financial penalties if they cannot meet their obligations on loan and the car is repossessed. 

Finally, securing a car loan through a lender can sometimes limit your options for financing down the road.

How to find the best-secured car loan?

When shopping for a secured car loan, it’s essential to understand the different types of loans and their differences. Here are eight steps to finding the best-secured car loan for your needs: 

Step 1: Look at your current financial situation. 

Step 2: Review your borrowing needs. 

Step 3: Calculate your monthly payment. 

Step 4: Compare the costs of secured and unsecured car loans. 

Step 5: Review your credit score. 

Step 6: Consider whether a second mortgage is a good option. 

Step 7: Talk to a car loan advisor about your options. 

Step 8: Get pre-approved for a secured car loan and start applying!


Secured car loans and unsecured car loans vary in more than just rates. Depending on your circumstances, one will likely be a better fit for you than the other. However, with that said, both can help you finance a new or used car, so it is really up to you to decide which is right for you.