Secured or Unsecured, that is the Question

SecuredLoansAdvisor — Wed, 26 Aug 2009 22:20:34 +0000

There are times in our life in which we will need to borrow money. For instance you may need extra money to buy a car or a home, but your income may not be enough. You should feel lucky if you have a close friend or family member who can let you borrow the money, however, in most cases, we have to depend on private lenders, like banks or credit unions. There are two main categories for loans, secured loans and unsecured loans. They both have pros and cons, keep reading to learn more.
Secured loans

This is the most common type of loans, in which you use your assets/collateral to backup the loan. This basically means that if you don’t pay it off, the lender could take your collateral and sell it to recover what they loaned you.

Due to the aforementioned, obtaining secured loans might be a risky thing to do, especially if your collateral is your primary home.

However, with a secured loan you will be able to borrow larger amounts of money than with unsecured loans. Usually secured loans are much more flexible (longer repayment schedules and lower interest rates) because the lender knows he can recover most of the money you received.

Paying a secured loan on time will also help you credit history, since lenders will report prompt payments positively.

Quick summary for secured loans:

Cheaper than unsecured loans
Longer repayment periods
Help you build your credit
Requires collateral

Unsecured loans

As with secured loans, there are different types of unsecured loans, like: credit card loans, payday loans, cash advances, business cash advances, factoring, etc.

These types of loans don’t require you to present your assets as collateral, but instead lenders rely on the terms of the contract and on your credit worthiness to pay the loan back.

Because the lender has nothing to back the money loaned, the risk they run is a lot higher. Therefore, the interest rate will be higher, the repayment term will be shorter and the amount you can borrow will be smaller.

The main advantage of an unsecured loan is that you won’t lose your house or any other valuable assets you might have, but always make sure you read the fine print, so you understand what a default is.

Quick summary for unsecured loans:

Funds are more expensive
Shorter repayment periods
Requires a good credit history (in most cases)

Doesn’t require collateral

What is a Secured Loan?

SecuredLoansAdvisor — Wed, 01 Apr 2009 04:13:13 +0000

A Secured loan is a type of loan that is protected by the borrower’s assets, that can be a house, a car, etc. Those assets now secure the loan as “collateral” or guarantee, in the case that the borrower cannot comply with the loan, the creditor will take possession of such collateral. Secured loans can have many uses, can be used in personal loans, business loans and commercial loans.

Secured loans are much cheaper that unsecured loans, and the reason is obvious, they offer collateral that may be used to cover the debt. On the other side, unsecured loans tend to be more expensive because they lack of any collateral or personal assets.

What are the benefits?

Lower cost when compared to unsecured loans
Longer repayment terms
Usually offers very attractive interest rates
Offer larger amounts of funds

What are the cons?

The risk of losing your personal property or assets
In this economy, secured loans are more complicated to obtain
The funding process tends to be much longer (depends on the loan type)
Requires large quantities of paperwork

Types of Secured Loans

There are many types of secured loans, the following are just the most common ones:

Mortgage loans are a type of secured loan use to buy property, like a new or used house.
Debt consolidation loans are used to consolidate someone’s debt into 1 bill
Business loans can be used for many purposes and may uses the business owner’s assets as collateral