Unsecured Business Car Loans

What You Need to Know About Unsecured Business Car Loans

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Understanding unsecured business car loans

Having cars on the road can be essential to your business. Whether it simply means you have a vehicle to travel in between offices in, or whether you and your team use your vehicles for your daily work, unsecured business car loans could be an excellent option for you.

Finding the right loan for you and your business needs can seem like an overwhelming challenge. We want to help to make the loan process as easy and efficient as possible. Speak to us today to find out how we can help you get the right unsecured business car loan.

Secured vs unsecured business car loans

Firstly it’s useful to understand the key terms when you’re dealing with unsecured business loans. The most important part to consider is whether a loan is secured or unsecured.

Secured loans are loans where the lender has security against the loan – in this case, it would be the car that you are borrowing money to buy. If you default on your loan and fail to make the agreed repayments in the fixed loan term, the lender can repossess your vehicle and resell it.

Unsecured loans do not have an asset securing them. This means that your lender will have no security if you fail to pay back your loan.

We can offer both secured and unsecured loans depending on your individual circumstances, cash flow and financial history.

What is an unsecured business car loan?

An unsecured business car loan is a loan specifically used to buy a car for your business, and the loan is not secured by the car you buy.

If you need to buy a car that's going to be used for business purposes, whether you're part of a company or operating as a sole trader, you have a range of financing options available. As opposed to loans that can help you purchase a vehicle for personal use, business vehicle loans can have tax benefits and lease options.

With an unsecured business car loan, the loan is attached to the business, not the car. This means that if you default on the loan, your lender will pursue your company directly, rather than taking the vehicle as in a secured car loan.

Is an unsecured business loan the same as a chattel mortgage?

No, and the reason for this simple. A chattel mortgage is a type of secured loan. In contrast to an unsecured business loan (where no security is given to the lender), a chattel mortgage uses the car as security for the loan.

Who owns the car in an unsecured business car loan?

Many people like the fact that with an unsecured business car loan, the business will own the car from the date that it is purchased on. This can have benefits to the business when it comes to tax deductions.

What are the benefits of an unsecured business car loan?

Although you’re likely to encounter higher interest rates with an unsecured business car loan, there are certainly some benefits that will suit certain businesses.

Benefits of an unsecured business car loan include:

  • Ownership of the vehicle from date of purchase
  • Ability to modify the vehicle if desired
  • No mileage limits or extra fees for heavy usage
  • Can be used to buy a used car
  • Tax deductions available
  • The vehicle will not be repossessed if you default on the loan

It’s worth figuring out roughly how long you envisage owning the car for. Often, using an unsecured car loan on a good vehicle that doesn’t need replacing can work out as the cheapest option long-term.

We can help you understand the pros and cons of getting an unsecured business car loan. Whether it works for you will depend on your circumstances and the needs of your business, so we’ll be able to better advise you when we know more about you.

What are the risks of an unsecured business car loan?

If you plan appropriately and always budget accurately, you shouldn’t encounter risks with many types of loans. Usually, issues arise when people stretch themselves financially or have misjudged what they are able to pay back each month.

The main drawbacks to getting an unsecured business car loan are:

  • Higher interest rates than with a secured car loan
  • Penalty fees if you attempt to pay the loan back early

How can you prepare for an unsecured business car loan?

You’ll want to take the time to find out everything you can about the unsecured business car loan before you commit. This will help you to plan and prepare and avoid any unexpected costs further down the line.

There are a couple of things you should be clear on before you commit:

  • Loan term
  • Repayment structure
  • Tax requirements
  • Interest Rates
  • Additional fees

How will you know if an unsecured business car loan is right for you?

Always ask for expert help. It’ll save you huge amounts of time and money, and give you the peace of mind that you’ve chosen the best option and are getting the lowest interest rate.

Positive Lending Solutions has decades of experience alongside access to a wide range of lenders – this means we’re in the best possible position to guide you through the loan process and ensure that you get a car loan that’s right for you.

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