For most of us, buying a new car outright is not an option. However, taking out a car loan can mean paying exorbitant interest rates and steep monthly instalments. A secured car loan may be a good alternative as many car loan providers now over this type of loan at highly competitive rates.

A secured car loan, as the name suggests, is a loan taken out specifically to buy a car and is secured against the collateral. The collateral is usually your home or property. The lender is protected against any potential default in payment so they can offer a lower APR on your loan.

In order to get a secured car loan, you will be required to place an asset, such as your home or property, as collateral with the lending institution. If the thought of putting your property at risk is too much of a daunting prospect, the car you plan to buy can be placed as collateral as well. In the latter case however, while you'll drive back home with the new car, its ownership documents will remain with the lending company until you have paid back the amount in full.

To get a secured car loan that suits your budget, give special attention to the collateral you are going to offer the lender as security. The interest rate and the loan amount you are offered will often depend on the value of the collateral. If a secured car loan is taken out against your home, which always has high equity, then the lender will readily provide a larger loan at a lower interest rate.

Apart from the attractive interest rates, it is the flexibility in repayment duration that makes secured car loans so popular with many people. Secured car loans are normally taken for a duration ranging from 36 to 72 months. Consider carefully however the repayment options available when taking out a loan with a particular lender. The longer the duration of your repayment schedule, the lower your monthly instalments, while with a shorter repayment schedule, monthly instalments will inevitably be higher.

Anyone thinking about taking out a loan to buy a car will of course be concerned about interest rates. The interest rate on secured car loans are competitively lower than many other types of loan. This is because of the low risk that secured car loans pose to the lender. To reduce the interest rate further, you should consider borrowing a lower amount or at least an amount which is below the equity of the collateral. Remember, even a slight reduction in the interest rate on a secured car loan can save a significant amount in the long term.

Comparing different secured car loan packages provided by lenders also helps is reducing your interest rate. Numerous loan providers now supply loan products online. Because they save money on overheads, they are able to offer attractive interest rates that may not be possible with bricks and mortar establishments. You can also get secured car loan quotes from multiple providers on one single platform, thus making it easier to carry out a comprehensive comparative analysis before you take any decision. Whether you choose an online or high street lender, always remember to shop around until you find the one that offers the amount you require at a lower interest rate.

Secured car loans are of great benefit for those with a poor credit history too. Most lending institutions will happily ignore your bad credit rating if you are bringing an expensive asset as security to the table. The lenders interest is safeguarded in that if the bad credit borrower defaults on their repayments, the lender is free to dispose of the asset secured against the loan in order to recover their money. Of course, someone with bad credit rating may have to be satisfied with an interest rate higher than someone with a good credit rating. Although, those with bad credit are still likely to be given a lower interest rate than if they were to apply for an unsecured loan. If a borrower can achieve a higher credit score then getting a lower interest rate on their secured car loan will be easier, while those with a lower credit score will find it more difficult to get such a competitive rate. Despite the fact that a borrower is willing to offer collateral, some lenders become cautious about who they offer a loan to as they do not want to take up time and money going through the process of repossession.

Secured car loans are easily available, however, anyone thinking about taking out this type of loan should be extra vigilant when deciding the loan amount as an excessive loan may become too much of a burden. Remember, you could loose your home if you can't keep up the repayments.