Category: Advice

Advice

Secured Vs. Unsecured Loans: Which one is right for you?

There are some fairly big differences between secured and unsecured loans, and it’s important that you know what they are. If you want to choose the right type of loan to match your borrowing needs, you will definitely want to get this information before making a final decision. A lot of people tend to rush into selecting one loan over another, and many of them end up regret doing so.

What are Secured and Unsecured Loans?

It is first important that you have a basic understanding of secured loans and unsecured loans. A secured loan is a loan that you take out but have to put some sort of collateral down for, such as your vehicle or even your home. An unsecured loan is a loan that you can take out without needing to put down any collateral at all.

Some examples of a secured loan include mortgages, home equity line of credit, auto loans, boat loans and recreational vehicle loans. Some examples of unsecured loans include credit cards, persona (signature) loans, personal lines of credit, student loans and some home improvement loans.

Interest Rates

When it comes to personal loans, the better your credit score is, the less you will spend in interest. People who take out both types of loans can pay a high or low interest rate, depending on what their credit is like. It is important to keep in mind that the amount of money that you spend in interest will at least partially depend on where you live.

If you want to get the best possible deal on your loan when it comes to interest rates, you will definitely want to make a point of looking for the right lender. Not all lenders charge the same amount for interest on the loans they give out, so you will need to keep that in mind as well.

Credit Requirements

Secured loans tend to have more lax credit requirements, simply because they require collateral, such as a house or car, to be put down in the event that the borrower cannot pay back the loan for whatever reason. Getting an unsecured personal loan requires better credit, but you don’t necessarily have to have perfect credit to get one.

It is highly recommended that you take a close look at your credit report before you start applying for any type of loan. Sometimes people find that there are mistakes on their credit reports that are actually negatively affecting their scores. If you are planning on applying for any sort of loan, you should really make a point of doing this right away.

Availability

You will find that most unsecured personal loans are available online as well as through traditional financial institutions like banks and credit unions. While it’s true that secure loans are sometimes available online, they are not as common. If you want to get a secured loan, you will most likely have to go down to a bank or lender’s office in person.

One of the great things about the technology age that we live in is the fact that you can apply for loans online fairly quickly and easily. You should be prepared to submit quite a bit of information, such as bank statements for proof of income, your phone number, address, email address and much more. Much of this information will be used to determine whether or not to approve your loan.

Conclusion

There are benefits and drawbacks of both personal and unsecured loans, and not everyone can benefit from either one. It is crucial that you take enough time to do your research so you can make an educated decision. There are a lot of different things to consider when you are going about making this sort of decision, and it’s certainly not a choice that you will want to make lightly. Both of these types of loans can be extremely helpful when you want to buy a new house or car as well as other things. These days it’s more important than ever to know exactly what you are getting yourself into when it comes to a personal loan, whether it is secured or unsecured.