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Personal loans vs. secured auto loans

A personal loan can be used for any purpose, whereas a secured auto loan can only be used to purchase a car. The amount that can be borrowed on a personal loan and a secured auto loan is determined by the lender, the loan, the market, and the borrower’s income and credit history.

Personal loans and secured auto loans can be fixed rate or variable rate. Personal loans can be secured or unsecured, while a secured auto loan is secured, usually against the car being purchased. Choosing a secured loan can make the loan cheaper and easier to get approved, as it is deemed lower risk by the lender.

How Much Can You Borrow?

The amount you are allowed to borrow will depend on the loan type and the lender, as well as your borrowing power.

The lender may assess your credit history, your current income and various other factors to determine how much you are allowed to borrow. If the loan is secured against the car, you may be able to borrow more, as the car will be used as collateral.

How do lenders determine your ability to repay a loan?

Lenders will usually look at your income and your credit file to assess your ability to repay a loan. Your credit file tells the lender how well you have dealt with credit in the past, helping them to determine how well you will deal with it in the future.

If you have repaid loans and credit cards on time in the past, it will suggest to the lender that you would be capable of repaying the loan they give you. As for your income, the lender will look at your income to determine whether you can afford to repay the loan.