This is a common decision that needs to be considered when borrowing money for a car loan, and each option has its pros and cons, so it would come down to what your intentions are with your loan and would really come down to your personal objectives and requirements.
Here are some pros and cons of each loan type:
Secured Car Loans
PROS
Usually, a lower interest rate as the car is used as security and a lower risk lend to the financier.
Usually more lenient assessment guidelines due to the lower risk than unsecured lending, which could allow you to borrow more money.
They could be easier to shop around, due to many dealerships and brokers having multiple options, where unsecured personal loans are not made available to brokers or dealers from many institutions.
CONS
You can usually only borrow money for the car being used as security only and any relevant car and loan insurances.
Must have adequate comprehensive insurance on the car being financed throughout the full loan term.
There will be restrictions on the car being financed, which could include the age of the car, or where and how it is purchased.
Unsecured Car Loans
PROS
Flexibility to use the funds for multiple uses, not just the car, which could help with debt consolidation.
In many cases, the interest rates are variable and would attract very little to no early penalties, which can be a good solution for those who know it will be paid out sooner.
Usually smaller minimum borrowing amounts, where secured car loans could be restricted to minimum amounts of around $8000-$10000 dependent on the lender.
No restrictions on the asset the funds are used for
Choice of whether you want to ensure the car or not.
CONS
Due to the lender having no security, the risk is higher and often will attract much higher interest rates than a secured car loan.
Quite often the monthly account keeping fees could be higher.
More stringent lending criteria could restrict how much you could borrow based on your application.
Much harder to shop around, and you may find you have to do the research on your own.
