Typically, when a person applies for a loan, he or she has to provide an asset - car, home, or any other resource - as security to be eligible for the loan. An unsecured car loan is a debt taken by the borrower to purchase a car without providing any collateral as security. In this type of a loan, the associated risk of the banks or non-banking financing organisations (NBFCs) of incurring losses is more. If a borrower defaults after availing a secured car loan, the lender has every right to seize his or her car to help recover part of the money that was initially invested. On the other hand, in case an unsecured loan is not repaid by the borrower, the only way a lender can prevent incurring any losses is by approaching the court and forcing the borrower to repay the debt. Due to being such a high-risk investment, unsecured loans are quite difficult to come by.
If you are planning to buy a new or used car and can’t decide whether you want to avail a secured or unsecured loan, you should carefully evaluate the advantages, disadvantages, and risks associated with them. This will help you make the best decision based on your requirements, situation, and convenience.
This scheme has a number of benefits that you should be aware of if you are planning to avail an unsecured loan while purchasing a car.
Similar to every other financial service, this financial plan also has a few points that you should keep in mind before you decide to opt for this loan.
While there are a number of benefits to an unsecured car loan, it also carries many disadvantages that one should be careful about before deciding to buy a car using this financing plan.