Anybody who has had to take out a big loan in the past knows what collateral is: it is an asset you put up as a guarantee – usually the item you are trying to buy – and you risk losing it if you do not pay back the loan. However, not everybody wants to have their new vehicle put at risk so openly, and there are thankfully other options that you can turn to.
Unsecured loans do away with collateral entirely, but they often compensate for the added risk on the lender’s part by having other stipulations you need to be aware of. In some situations, getting a car loan without collateral can be a smarter move.
Whether you live in Norway long-term or simply decide to buy a new car while there on a one-time visit, here are the things you need to know about unsecured collateral-free car loans.
1. Understand What You’re Getting Into
Unsecured loans are not bad, but they are an option, and that option suits specific situations or requirements better than others. When hunting down a car loan without collateral, you should understand the differences involved and how unsecured loans differ from your typical secured loan.
A secured loan for a car usually means that the car is being held as leverage – if you do not pay the loan, the lender can repossess the car entirely, even if you have almost paid off the loan by the time they repossess it. This means it is possible to lose the entire vehicle if you are unlucky, which can be even more complex if you bought the car in one country but live in another.
However, you are not putting up any collateral directly with an unsecured loan. If you fail to repay the loan, the lender can sue you or demand the money you owe them, but the car can’t be taken off your hands so easily. This makes the unsecured loan a safer option if losing the car would be worse than having to owe more money to your lender.
Why is this better? It depends on the circumstances. For instance, if you buy a car in Norway on a business trip and then bring it back to your home country, it could still be repossessed if you do not finish paying the loan. Even if it can’t be repossessed physically, this does massive damage to your credit history and often leads to you being sued and flagged as a bad debtor.
On the other hand, if you were to take out an unsecured loan and then take the car home, it would be handled like any other conventional loan – you owe the money and might end up being sued anyway, but you still own the car and are not risking its loss.
This depends on your personal situation, but knowing the differences between the two types of loans can help you decide which option is best for you. This can be especially important if you do not have much loan experience and are looking for the safest way to buy a car.
2. Consider the Interest Rates and Fees
Unsecured loans often come with slightly higher interest rates than secured loans since the lender is risking more by removing the option of repossessing the car. Of course, you get the trade-off of not having to put up collateral, so it is a matter of weighing up the pros and cons of each.
Naturally, different lenders will have different rates and fees, so you will want to shop around and explore your options either way. Remember that different lending groups might have their own thoughts about how much they want to risk for each unsecured loan, so some will simply charge more interest than others for a similar kind of arrangement.
Thankfully, it is not hard to hunt for the billigste billån uten sikkerhet (the cheapest car loan without collateral) with just a few internet searches. The hard part is actually identifying which of the many, many options you see are really going to be the most affordable and risk-free, and interest plays a large part in that.
If you are not native to Norway, remember to take currency conversion into account, too. The Norwegian Krone can have a very different value from USD or other similar currencies, so you might want to use an online currency converter to find the best deal.
3. Find a Good Car Loan Provider
Loans are only as good as the lender makes them, and choosing the wrong lender can cost you far more in interest and fees than you expected. This becomes especially important if you are a new arrival or tourist in Norway who does not have a great grasp of the language.
The first step is finding a lender that you can trust. The best way to do this is by looking for reviews and referrals from people who have used their services before. You can also ask around your friends and family members to see if they have any recommendations or if they have any experience with car loans themselves, or turn to social media if you know people online who could help.
The important thing is to find a reputable lender, so make sure that you research any company or loan service you are considering before you commit to anything. In general, look for companies with a track record of offering unsecured loans and dealing with customers well, and avoid falling back on loans that seem too good to be true.
Whatever you do, do not let yourself get pressured into accepting any loan you find. Slow down, consider your options in proper depth, and make sure that you are comfortable with any decision you make. You never want to rush into a car loan, especially if there is a language barrier that makes it hard to tell “billigste” apart from “dyreste“.
4. Plan The Application Properly
Whether you are getting a loan from an international bank or a local Norwegian lending service, you need to make an application – and that means getting a quote for the car you want. Going into a loan unprepared and having no solid justification for the money you are asking for is a quick way to end up causing even more problems for yourself.
It is best to understand how much you would need for the car you want and what kind of loan you will be looking for. You will also need the proper ID to prove that you are who you say you are and that you actually have the money you would need to pay off that loan.
More importantly, you want to look into your credit score. A low credit score can make it much harder to get approved for a loan, especially an unsecured one where the lender is risking a lot more, so it is best to ensure that your score is strong enough to carry you through.
Finally, if you do not live in Norway, you will want to check the rules and regulations for foreign nationals buying cars. Some companies may have additional restrictions or rules that apply when a visitor or tourist wants to handle a loan, and you want to ensure that you are aware of anything you might need to do or provide.
This also applies if you live in Norway but are trying to handle the loan while you are abroad. This will not necessarily make things more complicated, but it can still require extra pre-planning and paperwork that might not be obvious until after you have already begun the process.
5. Use Some Common Sense
As complicated as loans can be in theory, they are actually quite simple once all the paperwork is settled. You simply get given the money for a specific purpose, then have to pay that money back over time, sometimes with options to delay or accelerate payments if needed.
A car loan has an obvious goal in mind and is usually meant to cover the single large payment of actually buying a car, alongside smaller expenses. Do not lose sight of the fact that your loan is only as secure as your ability to pay it back, and do not take any unnecessary risks that might end up putting your car – and your finances – at risk.
Getting a car loan without collateral can be a huge win as long as you can pay the money back, and that is the most important point here. Even if you are no longer at risk of having the car repossessed, you still ideally want to pay back the loan on time, so make sure you keep an eye on your budget and do not fall behind on any payments.
You can always discuss things with the lender if unexpected problems arise, but most are only willing to let you bend the rules so far before it becomes their problem. In other words, take your loans seriously and make sure that you have a solid plan to pay back everything you have borrowed.
While there is no single ideal solution to getting a loan like this, these tips are a good starting point if you are not sure where to begin. Remember that unsecured loans come with their unique risks and challenges, but as long as you are well-prepared and understand what you are getting into, you can usually navigate the system successfully.