How Does a Secured Car Loan Affect Your Credit Score?

Secured car loans can have an effect on a borrower’s credit score. The secured loan requires a collateral or asset to back the loan terms in order for the lender to extend funds for the purchase of a vehicle. The loan terms and rates for secured loans are higher than they would be for a similar unsecured loan that does not require an asset or collateral pledge.

Secured Car Loan Interest Rates Impact on Credit

The higher interest rates associated with a secured car loans will translate into higher rates and fees. Credit reporting is impacted when late fees are compounded and the balance exceeds the maximum loan amount. Also, credit reports are affected because of lates and slow payments. 

Minimizing Effect of Secured Loan on Credit Score

Borrowing with secured loans may be the only option available to some individuals. Maintaining payments as scheduled and taking advantage of refinancing options are important ways to lower interest rates and protect a credit score.

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