Buying a car is a significant investment. In case you don’t have enough savings to buy it for cash, the next option you can consider is an auto loan. It means you borrow money from certified lenders to buy a car. You can do this whether you want to get a new car or a used one.

When you think about car loans, the first thing that probably comes to your mind are secured ones, that is, arrangements where your vehicle is not completely yours until you pay off the loan. These secured arrangements take your car as collateral, meaning lenders can use it to collect their claims if you fall behind your payments.

Of course, this is the worst-case scenario that can happen if you’re irresponsible towards your obligations. But if you have good financial habits and know you can regularly pay installments, a secured loan can be a good solution. It’s quite easy to obtain and has low-interest rates and relatively favorable repayment terms. On the cons side, lenders might have some requirements regarding vehicle age and condition.

But when you don’t want this kind of arrangement to limit you in shopping or fear that you can lose your car, you’ll opt for a car loan uten sikkerhet, that is, an unsecured car loan. It comes with no risk of vehicle repossession in case of repayment default. Also, it offers you a certain freedom, because you don’t have to buy a new car, nor does it have to be from authorized dealerships. If that’s what you want, you can shop around for favorable unsecured loans.

Know Your Needs and Possibilities

The first step before looking for unsecured auto loans is to find the vehicle you want to buy. Even if you don’t have a specific model in mind, you should know what you want, at least roughly, so that you can determine your budget. By knowing how much a vehicle purchase will cost you, you will be able to focus your search on appropriate deals.

The golden rule you should follow is to never borrow more than you really need and always do so exclusively from verified lenders. Before applying for any loan, consider your current finances and whether you currently can take and repay borrowed money. Check how much debt you have and how much you can afford to pay for a new debt without it burdening you too much.

Unsecured auto loan differs from secured arrangement in the method of debt collection in case of default. As the lender has nothing to repossess, they report your failure to the credit bureaus and have the right to take legal action against you to recover their money. This can happen if you don’t adhere to lending terms and don’t pay installments on time. But in case you have a positive credit history and good financial habits, unsecured loans can be a good deal.

Find a Reputable Lender

An auto loan is actually a personal loan to buy a car. You apply for it, and upon approval, you get money to use it for vehicle purchases. But you’re not limited to this purchase only, as you can use this money for other things, like insurance or traveling, of course, depending on the borrowed amount and your financial capabilities.

You can start your search for unsecured auto loans at your bank or local credit union. As their client or a community member, you might qualify for these financial arrangements. However, even if you’re eligible to borrow money this way, don’t rush. Instead, shop around to see if you can find more favorable deals.

Go online and look for lending providers that offer unsecured car loans. You can go directly to their websites for a detailed offer of these financial arrangements and information about the application process.

Check interest rates, fees, repayment terms, as well as some special requirements that lenders may have. In general, these loans come with higher interest rates precisely because borrowers aren’t obliged to provide collateral as a guarantee of repayment.

Check Eligibility

Even though they carry a higher interest rate, unsecured car loans aren’t easy to obtain. In fact, lenders can have quite strict eligibility criteria for applicants. They set minimum requirements in terms of age, income, and employment, but they can be quite strict about applicant’s credit history. Simply, financial arrangements without collateral for lenders carry a higher risk than secured ones. That’s why they carefully consider to whom they will borrow money.

Most lenders approve loans without collateral only to applicants with almost perfect credit scores. They do a detailed check of your history, so if you have a record of late payments or problems with repaying previous debts, there is a good chance your application will be rejected. Or you can get approved for loans with very high interest. As that’s not the best way to go, go through your credit report to see how to improve it and get more favorable deals.

Compare Offers

Once you know the APR rate, lending fees, and lenders’ repayment flexibility, you can compare several offers to find the one that suits you best. Depending on your financial capability and long-term goals, you can decide to take a longer or shorter arrangement. The first ones usually carry lower interest rates, while the latter is costlier. But you can repay short loans faster and thus make room for other financial arrangements.

As for lending fees, they vary depending on the lenders. Check their up-front and ongoing fees, as they can affect the amount you borrow. Don’t forget to ask about fees for additional payments or early repayment. When these are high, they can make you have a second thought about a particular lender.

It’s of utmost importance to compare several deals before you submit an application, as that’s the best way to make a well-informed decision. Keep in mind that too many applications don’t boost your chances of approval. Instead, they are a hard inquiry that can lower your score. So, only apply with lenders where you have a good chance of approval.

Discuss Loan Terms in Case of Default

This is something you shouldn’t leave to chance so you can avoid unpleasant surprises. Namely, since lenders don’t have collateral from which they can collect your debt in case of repayment issues, they can use some other methods to enforce payments. It’s important to be familiar with what awaits you if you can’t return the borrowed money.

In most cases, if you fall behind regular installment payments, you might face debt collectors. Lenders “sell” your debt to specialized agencies that’ll find their way to get their money back. It doesn’t always include vehicle repossession, but in that case, your case can go to court, which triggers more severe financial and legal consequences. In any case, it’s good to know how lenders can enforce loan repayment so you can prevent it. Here’s a further explanation on what happens in case of repayment default.

Unsecured auto loans might come in handy when you have good financial habits and can afford to borrow money with a higher interest rate. It allows you to buy any car you want and be without fear of losing it in case of repayment trouble.