Type of Loans
A Secured Loan Versus an Unsecured Loan
There are differences between secured personal loans and unsecured loans. These are both ordinary and common loans. These differences can be easily explained and understood.
The following definitions should prove helpful.
If you would like to take out a secured loan, you will need an item of value that is owned by you. This may include:
* a car
* a home
* valuable property
These items are considered to be collateral. The lender will hold the deed or the title until the loan is paid off in full. If the loan is not repaid, the lender will have the right to take possession of the item (collateral)and this will then be applied to the unpaid debt.
The Unsecured Loan
The first thing to understand about the unsecured loan is that this type of loan is a risk for a lender. Due to the fact that there is not any property to back it up, the interest rates are typically higher than the secured loan. There is no collateral involved. The unsecured loan usually offers rates that are lower than those of a credit card. This may prove to be an excellent option for those individuals don’t have equity within their homes to actually get approved for a home equity loan. The unsecured loan might have a fixed interest rate. Typically it will be due at the end of a term. It may be viewed as a revolving line of credit. It may have a variable interest rate. This loan is supported by the creditworthiness of the borrower. There is no collateral required for this type of loan. A high credit rating is usually required for this unsecured loan.