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?

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 Jerry in less than a minute to compare dozens of quotes from top insurers.
Eric Schad
Answered on Nov 18, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

Did this answer help you?

Ask us a question by email and we will respond within a few days.

Have a different question?

You can meet us at our office and discuss the details of your question.
Let Jerry’s experts help you find savings on your car insurance!
No long forms or spam · Get quotes from 40+ carriers
Find insurance savings (100% Free)
rating primary
4.7/5 Rating on App Store

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free