Understanding the Differences Between Unsecured and Secured Personal Loans
While needing to borrow money is a common occurrence, many people remain a little confused by the differences between unsecured and secured personal loans. However, before you make any borrowing decisions it is important for you to understand the differences and why a secured personal loan may actually be a better option for you.
The Main Differences Between Unsecured and Secured Personal Loans
As the name suggests a secured personal loan is a debt which is secured on an asset. While this can seem a great deal more intimidating than an unsecured loan or signature advance, there are a great many reasons why this type of loan may be a better option.
Secured personal loans tend to offer a more attractive interest rate to borrowers. This is because they represent a more diminished risk for the lender. Should you default on the loan, the lender has a legal claim to the property which the loan was secured on. This means that you will have a vested interest in ensuring that the loan is kept up to date, since you wish to retain your property.
Another difference with a secured personal loan is that they tend to have a more flexible approach to the loan term. Although you can obtain this type of loan on a shorter term, there is also the option for a longer term. This can mean that they are easier to manage, if your monthly budget is a bit more restrictive. You may find that you pay a little more interest over the course of the loan, it is likely that the monthly payments will be lower, making them more flexible.
Bad Credit Options:
These days, many people face the prospect of having less than perfect credit. A late utility bill or a missed credit card payment can have a detrimental effect on your credit and you may find that many attractive finance offers and deals are no longer available to you. Many high street banks advertise extremely attractive rates for unsecured loans, but you are likely to find that this type of offer is only available to those with perfect credit. However, secured personal loan providers tend to be a little more flexible in their lending criteria. As mentioned above, since the lender has the assurance of securing the loan on an asset, they tend to be a little more forgiving on blemishes on your credit file. Typically, the lender will look at your budget and how affordable the loan repayments are, rather than focusing solely on your credit record. This can be a great solution for those people needing money without forcing them to sell their assets. For example, if your vehicle is used as security, you can continue driving it and treating it as your sole property, providing you continue to make your loan repayments each and every month.
If you are interested in learning how to apply for secured personal loans, we would be happy to discuss your requirements and help you to find a great deal.