If you have a collector car sitting in your garage that hasn’t moved for ages, chances are you’ve thought about getting it back on the road. Whether it’s a classic Mustang, a vintage Chevy truck, or an old-school Corvette, these vehicles are more than just cars—they’re pieces of history and sources of personal pride.
But restoring them to their former glory can be expensive, between purchasing new parts and detailed restoration work. Some car owners don’t have enough cash lying around to handle these costs upfront, which is why classic car loans can be a great solution.
Secured and unsecured loans are two popular options for getting the money you need, and each comes with its own set of advantages and disadvantages. Here’s what you need to know:
What is a secured loan?
A secured loan is backed by a valuable asset you own, like a car, called collateral. A loan backed by collateral is less risky for the lender because if the borrower doesn’t make payments, the lender has the right to take possession of the collateral to recover the amount owed.
Since collateral makes the loan safer for the lender, secured loans may offer lower interest rates (the cost of borrowing money) and higher borrowing amounts compared to unsecured loans.
Pros:
- Lower interest rate since there’s less risk for the lender
- Access to a larger borrowing amount
- May be easier to get approved if you have less-than-perfect credit
Cons:
- You risk losing your car if you don’t repay the loan
- The approval process takes longer because lenders need to verify ownership and check your car’s value
What is an unsecured loan?
An unsecured loan doesn’t require any collateral. Instead, lenders assess your risk as a borrower by looking at factors like your credit score, credit history and income to determine whether to approve the loan. Because an unsecured loan doesn’t require collateral, its interest rate may be higher than the interest rate of a secured loan.
Pros:
- No risk of losing your car
- Usually quicker to get the money
- Less paperwork and fewer approval steps
Cons:
- May have higher interest rate
- Smaller loan amount may be available
Which loan is right for you?
When picking your loan, think about these important points:
How much money you need
A secured loan might be your best bet if your car needs big repairs. Say you’re fixing up a classic 1967 Camaro. You need $15,000 for engine repair and new paint. You have a steady job, good credit score and are confident you can make regular payments. Here, a secured loan could work, giving you a better rate and access to a larger loan amount.
But an unsecured loan might work for you if you’re just doing small fixes like new tires or brake pads. For example, you may need $3,000 for new tires and brakes on your classic VW Beetle. An unsecured loan might be the better choice because you’ll typically get the funds quicker and won’t risk losing your car.
How fast you need money
If you’re in a hurry, unsecured loans usually get approved faster. A secured loan can take more time because the lender has to determine the value of your car first.
What’s your credit like?
If your credit score is strong, an unsecured loan could offer a decent interest rate. If your credit is not-so-great, a secured loan might be easier to get because the lender takes on less risk since there’s collateral to fall back on.
How comfortable are you with risk?
Think carefully — are you okay using your collector car as collateral? If you can’t repay the loan, you might lose your car. Unsecured loans don’t have this risk, but you be likely to pay more in interest.
Tips to get the best loan offer for your budget
- Compare different lenders to find the best rates and other terms
- Pay attention to interest rates and repayment plans — small differences add up
- Make sure you understand any extra fees or penalties
- Check your budget carefully to be sure you can afford the monthly payments
Final thoughts
Both secured and unsecured loans have their own advantages. Choosing the right loan depends on your needs — like how much money you need, how fast you want it and whether you’re okay risking your car.
Take your time and think about what’s important so you can figure out how to get your collector car looking amazing and back on the road!
