Whether or not you are familiar with the terms secured and unsecured loans, you are probably familiar with the underlying concepts.
Secured loans are supported by a valuable asset or collateral, such as your home or car. Why is it important? The answer to that will reveal why a Secured Personal Loan is such an excellent choice.
Better Repayment Deals
Secured loans are less risky for lenders. The reason, as mentioned, is because of collaterals.
If somehow the borrower defaults, the lender can still recover with its loss through a valuable asset or property.
The less-risky loan agreement explains why secured loan interest rates are typically lower than unsecured ones.
If you have a stable source of earnings, valuable assets, and good credit history, you can shop around for the best rates.
Yes, the lower the risk, the lower the loan interest rate.
Here are some of the most common types of collaterals to get the best deals on banks, credit unions, or online lenders:
- Real estate
- Bank accounts
- Insurance policies
- Precious metals, coins, and collectibles
- Business machinery, equipment, and other assets
Comparing loan rates and terms from various lenders can assist you in determining how much a secured loan will cost.
You can also compare them by calculating your monthly payments and total interest paid with an online secured loan calculator.
Of course, most loan approvals usually start by asking if you have a job to compensate for your monthly dues. But, with secured loans, you may not even need to have a job, to begin with.
While lenders prefer that the borrower has a job, employment is less of a consideration if the loan is being taken out due to job loss, especially if the loan is backed by sufficient collateral.
A Secured Personal Loan may also be available to those who have a poor credit history or a low CIBIL score.
If you have a poor credit history, it may be difficult to obtain an unsecured loan until you spend months, if not years, rebuilding your credit.
Fortunately, when you add a collateral asset to the mix, the lender’s ability to determine whether you can or cannot repay your loan is rendered meaningless.
Borrow More Money
If you need a big sum of cash, secured loans are frequently your primary funding source. Lenders are more willing to lend larger sums of money when a loan is secured by valuable collateral. If you have more equity in your property, you may be able to borrow more money.
Remember, a lender will only lend a large sum of money if they are confident they will be reimbursed.
By putting a valuable asset on the line, you guarantee that you will go to great lengths to repay the loan.
Yes, lenders want to know that you’ll keep their leverage once you’ve received their funds.
When lenders place a lien on your collateral, they are aware that they may be able to seize the assets you are using as collateral in the worst-case scenario.
You may have the chance to lose your valuable property. But, this should not scare you. You will not only benefit from your loan offers, but you will also quickly regain possession of your property if you use secured loans.