Secured Vs Unsecured Loans – Understanding The Difference To Make The Right Choice

1. SECURED VS UNSECURED LOANS - UNDERSTANDING THE DIFFERENCE TO MAKE THE RIGHT CHOICE Taking a loan has become the best option for people seeking additional funds to invest in things that can enhance the comfort and convenience of their lives. From home loans to auto loans and student loans to loans for medical emergencies, borrowers today can choose from a wide variety of loan options to meet their specific financial needs. However, in most cases, the loans can be classified as either secured or unsecured. There are several different types of loans, including home loans, depending mostly on the terms and conditions with which they are offered to the borrowers. This categorization holds true irrespective of whether the borrowers opt for a personal loan, an ​instant cash loan direct lender​, or even a loan against a credit card. Thus, the key to gaining the best benefits of taking any type of loan is for the borrowers to first understand the difference between secured and unsecured loans so that they can make the right choice. Learning About Secured Loans and Their Key Features These types of loans require the borrowers to offer some sort of security to the lenders in the form of collateral, to cover the loan amount. The collateral thus offered should be of the same or more value as the amount being lent to the borrowers and can include things like a piece of property, documents of stocks and bonds, and even precious metals and jewels. The lenders are authorized to become the rightful owners of the asset put up as collateral and can be used by them to recover the lent money in any way they deem fit. The most important features of a secured loan are as follows. ● Since the amount being lent is covered by some collateral, secured loans are generally offered at relatively lower interest rates as the risk of loss is greatly minimized. These loans are generally offered for significantly higher amounts to fulfill the big-ticket needs of users such as buying a house or a vehicle or even for specific medical treatments. Hence, they often come with longer repayment tenures and lower monthly EMIs. Most secured loans are difficult to qualify for as the lenders tend to check out every minute detail about the borrowers as well as the authenticity of the collateral they might have put up as security. ● ● Understanding Unsecured Loans and Their Key Features ● As the name suggests, unsecured loans are those that do not require the borrowers to offer any security or collateral to the lenders. These loans are becoming extremely popular as they can be availed even by people with limited resources. Since these loans are a high-risk investment for

2. the lenders, they generally come with a hefty interest rate. The most important features of unsecured loans are listed below. ● These loans are mostly offered for smaller amounts and have significantly shorter repayment tenures as compared to secured loans and the documentation time and the processing period is also quite less. Since the loans are offered without any guarantee, the interest rate charged on them is quite high besides which the borrowers might also need to pay a relatively higher EMI. This is a strategy used by lenders of such loans for recovering their money at the earliest to minimize the risk of loss. As mentioned before, the processing time of these loans is generally quite low, especially if the borrowers opt for a ​loan in 5 minutes ​facility offered by various lenders, making them easy to qualify for. ● ● Secured Or Unsecured Loan - Which Is The Best Option? Both secured and unsecured loans are designed to meet the specific monetary needs of borrowers. However, deciding which loan is the best depends upon a variety of factors related mostly to the borrowers. The most important of these factors are listed as follows. ● ● ● ● ● ● The purpose for which the loan is sought by the borrowers. ​The amount of the loan being sought and its urgency. The current net worth of the borrowers and any expected changes. ​Their Credit Score and general creditworthiness. The repayment capacity of the borrowers and their preferred tenure. Whether or not the borrowers can offer some collateral. Borrowers should carefully consider each of the above-listed parameters before deciding about which category of loans would be best suited for their needs. Original Source: https://blog.moneyinminutes.in/secured-vs-unsecured-loans-understanding-the-difference-to-make-the- right-choice/