Pros & Cons Of Secured and Unsecured Loans

pros-cons Whenever someone has a need and the fulfillment of which depends on a sum of money that one doesn’t have, a loan can be the answer. You just need to find someone to lend you the money in order to fulfill the need. However, a loan means the money has to be returned under certain conditions. As it is in their interest for you to find it easy to repay the loan, lenders offer convenient repayment terms. There are a variety of loan options, designed for different financial positions and affordability of every borrower.

If you apply for a secured loan you need to know it involves collateral in the form of property. The property offered as guarantee is in many cases the house of the borrower, so for homeowners obtaining such a credit can prove quite easy. It is highly improbable that a person living with the parents or in a rented place would obtain a secured loan. The best solution for such persons is the unsecured loan, which does not imply collateral and can very well satisfy the need for money.

There are both advantages and disadvantages for unsecured and secured loans. Lower interest rates are offered by secured loans compared to the unsecured ones. The reason for this is the security carried by the property guarantee. For the same reason larger amounts of money can be borrowed through a secured loan. For homeowners the sum they can obtain by guarantying with their house can reach even 80 or 100 per cent of the house value. There are, however, disadvantages for secured loans. First of all, in case of default, the lender can legally repossess your house. The time needed to obtain the secured loan is also longer than in the case of an unsecured one. This happens because the procedures of asset or property valuation which are required. Thus, a secured loan is not the option for urgent situations.

Unsecured loans have also good and less good parts. The good thing about these loans is that you don’t need to guarantee it with any property or asset. Due to this, it can also be obtain quite fast. However, because the risk for the borrower is higher, the interest rates are also higher and the period of refunding is shorter than in the case of a secured loan.

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