Financial topics can seem intimidating if you do not have experience with a particular topic. If you want to look at 500 down used cars but are concerned that you will not qualify for the right type of loan, you may be dreading the process of trying to get a car. No matter where you are in the process of looking at used cars 500 down, it is important to understand what type of loan you will need when you find the vehicle that is right for you. The two basic loan types are secured loans and unsecured loans. Keep reading for a brief description of each.
What is a Secured Loan?
A secured loan is a type of loan that is attached to a physical object. The loan is given to purchase a physical item and that item serves as the collateral for the loan. For example, a home loan is considered a secured loan. The money from the loan is used to purchase the house. If you do not make your payments, the loan issuer can foreclose on your house and recoup some of the money by selling it to someone else.
What is an Unsecured Loan?
An unsecured loan is a loan that is not attached to a physical object. If you do not pay your payments, there is nothing for the loan issuer to take and resale to recoup the money. A credit card is an example of an unsecured loan. You can spend the money on whatever you want with a credit card and it is not linked to a particular item. It typically takes good credit history to qualify for an unsecured loan because there is no collateral.
Is an Auto Loan Secured or Unsecured?
An auto loan is considered a secured loan. The car itself is the collateral for the loan. If you go to buy here pay here car lots and ask about financing, your financing options will be secured loans. Secured loans for cars can be difficult to get at traditional car lots even, with the collateral of the car. The good news is that buy here pay here dealerships provide in-house financing for cars and can make decisions on factors other than credit history.
If you need financing for a used car but do not have great credit, take a look at a buy here pay here in Phoenix, Arizona such as Auto Action. You can get approved for the secured loan you need to purchase a used car by providing some basic information – none of which includes your credit score.