Secured vs Unsecured Loans

secured-unsecured The needs for loan requests are varied, but they all have as purpose the achievement of people’s financial goals. Among all the types of loans existing, there is one to match your need and financial availability. You just need to find which one is for you. Loans are mainly of two types: secured loans and unsecured loans.

Secured loans imply a guarantee that you give to the lending institution, to assure them that you will fulfill your financial responsibilities. Such guarantees are different types of assets, such as a house, car or even stock certificates. Getting the loan doesn’t mean turning over the assets. The simple fact of owning them is a security to the lending institution that in case of default, they can repossess the property and regain at least part of the loan by selling it.

Unsecured loans, however, as the name states, don’t require a guarantee; they are just based on your credit rating. It is a suitable type of loan for those who don’t owe any property or just don’t want to risk loosing it.

It is difficult to decide which type of loan is the best. They are very different and apply to different situations. It only depends on your priorities and needs. For some it is important to obtain a high amount payable in a long period with low interest rate.

If you recognize yourself in this kind of expectation, then you should apply for a secured loan. The reason for this is that the interest rates, the period of repayment and not least the amount of the loan are dependent on the risk the lending institution is taking when giving you the money. The lower the risk, the larger the amount of the loan can be, on a longer period and with lower interest rates. The lender is assured that in case you fail to pay, he still has the possibility to regain the loan by selling the collateral.

No comments yet, be the first.

Leave a Reply