Why Are Car Loans Secured With Collateral?

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What Is Collateral?
Why Are Car Loans Always Secured with Collateral?
Traditional Loans with Collateral
Can You Get a Loan with No Collateral?
What Is an Unsecured Loan?
Secured vs. Unsecured Loans
Requirements for a Secured Loan
Credit Score. This representation of your creditworthiness is based on your credit history as reported by a credit bureau and is a major factor and impacts your interest rate. Your income and current debts. These are also important considerations. The lender wants to make sure you can comfortably afford your auto loan payments in addition to your other financial commitments. Employment. You’ll need steady employment for at least 12 months, although the exact time frame can vary from lender to lender. Other Types of Consistent Income. These might include alimony or disability payments, which may also be sufficient for your application. Residency Standards. If your credit is poor, a lender may set certain residency requirements, such as living in the same home for the last 12 months.
The Takeaway
Frequently Asked Questions
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About the Author
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
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