What are Secured Loans? And, What are Unsecured Loans

Many people today often consider taking personal loans. The scenario usually occurs when consumers are in dire need or when in need of immediate emergency funds. Consumers would often be confused when it comes to choosing between the various types of loans available in today’s day and age. Two primary loans are secured and unsecured loans. Knowing the difference between the two types of loans, whether they’re auto loans, house loans, etc., would help consumers make wiser decisions at the end of the day.

What is the difference between the two?

When you chose to take an unsecured loan, this means that you are taking loans without leaving security. In other words? With an unsecured loan, you can get a loan, regardless if it’s a truck loan or car loan, without the process of leaving collateral for the bank. However, secured loans while not being backed by collateral would often be backed by an asset. This asset would return to the bank if you should fail to pay back the loan.

However, with secured loans, you would have to drop collateral before you can take the loan. One such loan that falls into this category is the car title loan. Upon failure to pay, the bank would have the right to repossess your car. To get an unsecured loan, you would have to have a credit score which is reasonably high or on the good side.

Advantages of an Unsecured Loan

One of the biggest advantages of an unsecured loan is the fact that you do not have to have collateral before you can get the loan of your choice. You can also get an unsecured loan in many places especially in Hayward. There are available in banks and even credit unions.

Disadvantages of an Unsecured Loan

You would probably have to pay higher interest rates than secured loans. One of the reasons for this is that you do not leave any security for the loan. Before you can qualify for the unsecured loan, your credit score must be high.

Advantages of a Secured Loan

You would have lower interest rates and fewer risks attached to it. If your credit score is moderately good, this can be enough for you to qualify.

Disadvantages of a Secured Loan

You would be handing over the title of a property to the bank. Should you default on payment, you run the risk of losing that property. One of the best-secured loans which you can take are car loans. Read more about loans from https://en.wikipedia.org/wiki/Loan.