Money is always the first most important need for every individual and borrowing loans for personal use or for any other purpose is very common regardless of what type of loan you choose. But now days it is not easy to borrow any loan so easily as quickly and easily getting a personal loan are pretty much over. Due to financial meltdown from late 2007, banks and credit unions have taken back their hands from lending loans to consumers which has lead to difficulty for many consumers to qualify for a loan. But there is still some possibility of borrowing loans because of the financial needs of consumers. But before applying for loan some facts are very important to be known. There are two different types of loans generally offered to consumers:- secured loans and unsecured loans. To apply and borrow secured loans it is very important to submit some form of pledged as security for repayment of a loan from the borrower for example your home or car and thus has no risk in taking this type of loan than compared to unsecured loan.
Secured loans in other words can be explained as a loan borrowed in condition than he/she has to pledge some asset like car or property as collateral for the loan. This loan then turns into secured debt which is owed to the creditor who gives the loan to the borrower. The debt is thus secured against the collateral and if in case the borrower is unable to pay back the loan, creditor with its full right can sell borrowers car or property and take back the amount credited to the borrower. If the loan taken by borrower is higher than the collateral which does not raise enough money to pay off the full debt, the creditor with his full right can obtain a deficiency judgment against the borrower to take the remaining amount from him/her.
Types of secured loans are as follows:-
- Mortgage loan
- Nonrecourse loan
Advantages related to secured loans:-
Compared to unsecured loan, unsecured loan you don’t have to pay more interest rate as it is generally lower and more affordable. Creditors offer longer period of time to pay back the loan which provides more flexibility with repayment of the loan and also relaxation due to extend of time. In unsecured loan you cannot borrow larger amount of money but in secured loan it is possible to borrow larger amount of loan according to your need. Secured loan does not require perfect credit history as though it is less you can apply for loan. This is because you are providing the creditor’s collateral for a secured loan thus lenders will be assured that they will get their money back even if any default comes on the loan from borrower side.
Loans can full fill your needs but not for lifetime as you need to repay the loan amount on time back to the creditor. Thus it is very important to learn in detail about which loan is best and which is risky. Ask some questions to yourself before taking loan that can you afford to repay the loan? Or what are the terms and conditions of the loan? There are many more points to be considered before applying for loan.