Are car loans considered secured or unsecured?

I've heard that having secured loans are better than unsecured. Is a car loan secured or unsecured? Why is one better than the other?

Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you have a traditional
car loan
, it’s considered a secured loan. In simple terms, a secured loan is a loan that has some type of collateral, like your vehicle or your home. Secured loans often:
  • Are easier to qualify for
  • Have lower interest rates
  • Require you to have full coverage car insurance
Unsecured loans are loans that have no collateral. In general, these are signature loans you might get at a credit union or a bank. Because of the lack of collateral, unsecured loans:
  • Have a higher interest rate
  • Are more difficult to qualify for
  • Allow you to choose the amount of car insurance coverage you want to have
You can use an unsecured loan to purchase a car, although this is less common. People might use an unsecured loan to buy a car if:
  • The car loan is less than the minimum amount the lender offers for a car loan (usually around $5,000 or less)
  • You want to buy a car with a
    salvage title
    or a rebuilt title
  • You want to buy a classic car
In a vast majority of cases, you’ll get a secured car loan for a new or used vehicle. Because you need full coverage auto insurance, you should definitely shop around to get the best rate possible. Sign up with
in less than a minute to compare dozens of quotes from top insurers.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.

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