31 Mar 2019 | 3 min read
If you are gearing up to take the loan, then you would have come across two terms, secured loans and unsecured loans. Before opting for either type, you must be aware of the pros and cons of both loan types. In the case of an unsecured loan, you can get money without putting anything as collateral. Whereas a secured loan is the one where the bank may ask you to put something as security, it can be property papers, cars or anything that your lender specifies. This blog will also give you an insight into a personal loan.
As already mentioned, secured loans demand the borrower to put something as collateral. The loans may vary, and the lender may ask you to put your home, car or savings as security. When people buy a home or car, they usually take a secured loan. Irrespective of the type of secured loan you avail, the lender can seize the property in case you fail to make the repayment of the loan. If you have kept your car as collateral, then the lender has the right to seize your car.
Best Personal loans are usually unsecured loans. It means that the applicant doesn't need to put anything as collateral. But, the bank demands a good credit score for personal loan approval. if you have a low credit score don't worry you can improve your credit score easily. Personal loans are a multi-purpose loan, and you can use this amount to fulfill your emergency financial requirement.
Unlike a secured loan, the bank cannot seize your property or car or asset because nothing has been put as collateral, but yes, they do a negative rating because of which your credit score will get affected, thus hampering your chances to get approval for other loans in the future.
Well, both types of loans have their own sets of pros and cons. Thus, you should choose the type of loan as per your requirements and limitations. There are many banks and credit unions along with with online lenders offering both secured and unsecured loans; hence it is always advisable to hunt around for best deals before signing the dotted lines.