Why do lenders always make you secure a car loan with the car as collateral?

I'm not all that knowledgeable about car loans, but I want to understand more. Why do lenders make you secure a car loan with the car as collateral?

Great question! A car loan is a type of secured loan, which means that the lender holds collateral. In the case of a car loan, the vehicle itself is the collateral. The reason why a lender holds your car as collateral is because it holds value that can be liquidated if you default on your loan.
Because the lender holds the vehicle as collateral, they also want to make sure it retains its value. That’s why lenders make sure that you have comprehensive coverage and collision insurance on your car. In case something happens, the car is fixed back to like-new condition.
Since lenders require full coverage car insurance, you may as well shop around to save the most money. The easiest way to do this is with the Jerry app—we’ll get you customized quotes from top providers, so all you need to do is choose the plan that works best for you!
Kudos to you for wanting to learn more, and hope this was helpful!
Eric Schad
Answered on Oct 19, 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