How to get a car loan - secured vs unsecured

Family In Car

Sally Conway

Written by: Sally Conway
Head of Consumer Communications
2nd February 2021


With people’s daily travel routines changing, demand for used cars has soared.

Between July and September 2020, sales were up 4.4% with over two million used cars sold. That’s why we recently put together an expert guide on:

The smart way to shop for a second-hand car

If you are one of the many people looking to buy a used car (or a new one), you may be considering finance options such as a personal loan.

To help you understand how you can get a car loan, we’ve put together this guide covering the difference between unsecured and secured car loans, likely eligibility criteria, and some other important things to consider before you apply.


Are car loans secured or unsecured?

Car loans can be secured or unsecured.

Secured loans involve securing the amount borrowed against a personal asset, such as your home. Similarly to a mortgage, failure to pay a secured loan could result in your home being repossessed.

A secured car loan is not to be confused with what is known as a logbook loan. Logbook loans are when you secure your loan against a vehicle. These allow you to get a secured loan without risking repossession of your home, but you’ll need to own the car first. So, these are not suitable when you want to buy a new motor.

At Shawbrook, we offer unsecured car loans. This means the loans are not secured against any of your assets. As lending money with an unsecured loan is a higher risk for lenders, the interest rates offered can sometimes be higher than a secured loan. But at Shawbrook, you’ll always know the exact rate you’ll be offered before you accept any terms.

For more information about the different options available to you, visit:

Our ultimate guide to financing a used car



What is needed to apply for a car loan?

Depending on the provider you choose to borrow from, there will be different requirements needed to get a loan.

The kinds of things lenders look for when deciding if they can accept you for a loan include:

  • Your age - providers will usually have minimum and maximum cut-offs
  • Your credit score - this can indicate how you have managed credit in the past
  • Your income - lenders may use this to tell how realistic it is that you can repay the loan

These factors may also affect the rate a lender offers you. Although lenders may advertise a Representative APR, regulations mean only 51% of those accepted need to receive this exact rate. So, you may get a higher or lower rate depending on these factors and more.

At Shawbrook, we offer personalised quotes with guaranteed rates. So, if you apply for a car loan quote with us, you’ll know exactly the rate you’ll get before you agree.

We require applicants to meet the following eligibility criteria:

  • Be aged 21 to 75
  • Have been a UK resident for at least three years
  • Have an annual income of at least £15,000
  • Have a personal bank account in the UK

To apply for a car loan quote with Shawbrook, you’ll need the following:

  • Residential addresses for the last three years
  • Contact details, including an email address
  • Employment information
  • Bank account details

Every lender is different, so eligibility criteria will vary if you choose another loan provider.

All loans are subject to status and the interest rate you’re offered will vary depending on your financial circumstances and chosen loan amount. Terms and conditions apply, so make sure you read these carefully before you make a decision.

To find out more about how Shawbrook’s loans work, visit our dedicated car loans page.



The pros of using a loan to buy a new or used car

Using a personal loan to buy a new or used car may or not be the best option for you to finance a vehicle.

It’s essential to weigh up your decision carefully before you borrow.

If you are considering buying a car with the proceeds of a loan, some of the pros of doing this are:

  • It enables you to own the car outright immediately
  • The amount and length of the loan are relatively flexible. With Shawbrook, this is from £1,000 to £50,000 over one to seven years. You can use the loan to cover the cost of the whole car or just part of it.
  • A car loan can be simple to apply for, and funds are usually received quickly. At Shawbrook, we make it easy to obtain a guaranteed rate with our quotes, too.
  • Loan repayments can be fixed for the entirety of the term. This means you’ll know exactly how much your each of your monthly payments will be. But be careful of lenders who are offering loans with variable rates.
  • No deposit is required, unlike some other car finance options such as personal contract purchase (PCP) or hire purchase (HP) agreements.
  • If you have a good credit score, you may be able to get a rate that will work out cheaper than other finance options.

Things to consider before getting a loan to purchase a car

Although loans can be cheaper than dealer finance options, it is still important to understand the final cost of the loan amount. For example, buying from a dealer with 0% finance can sometimes work out cheaper, so you need to understand your options fully.

If a car is something that you can save for, it will always be cheaper to use cash funds to pay rather than take out a loan. If you are considering saving, we’ve put together a guide on saving tips.


Getting a car loan with Shawbrook

At Shawbrook, we are proud to be different. And that’s why we’ll be transparent from the very start.

If you’re considering getting a car loan with Shawbrook, you can see if you’re eligible without affecting your credit score. And if you qualify, we’ll offer you a guaranteed rate upfront, so you know exactly how much the overall loan cost will be — helping you make a more informed decision.

For more information about Shawbrook’s car loans and how to apply for a quote, visit our car loans page.