Wednesday, 11 December 2013

Secured Vs. Unsecured Loans – Why One Should YOU buy?

When I sit about answering this question, what I am really talking about is when you should and should not opt for a secured loan. Therefore, the emphasis remain on the factors which determine whether or not it is these secured loans you need. One thing I can assure you is that these secured loans are not compatible with every one of you. Having said that, I can start discussing factors which you should look into yourself for.

Firstly on the list is the collateral. What primarily sets apart secured loans from unsecured ones is the presence of collateral. This means that to get your hands on a secured loan, you first have to secure the loan by pledging something as security. This can be anything from your house to your car. If you can afford to get access to something you can keep as collateral and think it is in your interest, you have your go ahead. However, not everyone is able to do so. For the latter category, the secured loans are quite distant as a result of this absence of collateral. Hence, the first stop in your self-assessment is assessing whether or not you can manage to secure your debt. At times, people do have houses and other properties but feel rather reluctant in using them as security for their debt. Thus, it is not just dependent on your ability to manage a collateral but also on your willingness in doing so.

Secondly, your credit rating comes into play. The reasoning is simple – secured loans for obvious reasons are less risky to lenders and therefore, do not have hefty credit rating requirements. In contrast, unsecured loans are relatively dicey, which is why lenders of such loans are more into looking into the creditworthiness of the borrowers. With secured loans, even with high chances of default comes a guarantee of collateral seizure. Now, if you do have a credit rating you can boast about, you can manage an unsecured loan if you want. But, and this is a bit but, if you do not, chances are that the lenders would be rather reluctant in letting you get access to unsecured loans. Here, you have two options – either you can simply resort to secured loans and set apart an asset as collateral or turn towards loans for bad credit individuals. The latter comes with amplified interest rates and thus, if you can manage a collateral, secured loans are my personal recommendation.

Lastly, your personal preference comes into play. One reason behind it is the varying cost of the two types of loans. Unsecured loans come with relatively hefty interest rates, while secured loans, as a result of reduced risk, are not that expensive to service. However, the factors that shape your preference are not limited to the cost and can extend further.

The end result would be a weightage of the above mentioned factors, which would form the perfect cost-benefit analysis, making the result clear to you. Getting loans entail servicing in terms of interest rate payments, while they have a bunch of other repercussions, as well. Therefore, exercising negligence is not a wise option for anyone. You need to know what kind of loan fits you better and the above mentioned analysis helps you figure just that.By the way I read all this about secured loan on, you can also visit this site.

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