Often in our search for finance options, we are led into a crossroad where we have to make a choice between secured and unsecured loans. Both are equally alluring and put the borrower in a difficult spot. It is difficult to make up the mind regarding one particular finance option because each has their share of advantages and disadvantages. What makes it more difficult to decide upon the finance option is that both secured and unsecured loans have a conflicting set of features, and the disadvantages of one are countered by the other.
Secured loans vs. Unsecured loans
Secured loans are the most conventional method of financing large sums of money. Even in older times people used to take loans to use in agriculture or other such needs by keeping their lands as security. Unsecured loans, on the other hand are of a recent origin. Since secured loans required the borrower to keep his home as collateral, many people who were without homes or who did not prefer attaching homes to obligations were left without finance. This also hampered the lending business of the lenders because the group was sizable. Thus, unsecured loans were launched as an alternative to the secured loans.
Misconceptions on Secured loans
There are many a myths doing rounds that have led to a sagging popularity of secured loans. People believe that by offering home as collateral they will have to move home until they repay the amount lent. People only transfer the ownership rights and not the right to live in the home. The lender can lay claim to the home only when the borrower does not repay the loan in full.
This will particularly interest the homeowners who do not take secured loans to protect their homes. Another important point that these people need to keep in mind is that they cannot escape the lender even on taking an unsecured loan. Though these loans are offered without any backing, the lender finds ways through which to recover the amount remaining on the unsecured loans.
This will shift a major part of the clientele for unsecured loans that comprises of the homeowners. However, unsecured loans continue to be the lifeline for the tenants. This is in spite of the fact that unsecured loans are more costly than the secured loans. The rate of interest charged from the unsecured loan customers is higher because of the larger risk involved.
Credit requirements
One often gets to hear about credit history in the financial circles. Credit history is a record of the conduct of an individual in terms of the credit behaviour. Any failure by an individual on any debts, loans, or mortgages is immediately recorded in the credit file. Though lenders prefer the borrower to have a good credit history, they do not attach a special importance to it if the borrower is offering collateral. Home can back the loan if the borrower refuses to. The backing however is absent in an unsecured loan. This is why lenders demand a good credit history when offering an unsecured loan. Lenders who accept to offer unsecured loans with bad credit try to compensate the risk with a still higher interest rate.
Terms differ with a secured loan
With a Secured loan, you can in fact enjoy more favourable terms than the unsecured loans. Apart from the low interest rate, there are many more features exclusively for the borrowers of secured loans. Some lenders allow the borrowers to extend the period of repayment of the secured loans as much as they desire. Typical repayment period extends between 5-30 years. Extending the term of repayment however, increases the interest that a borrower will have to pay. Borrowers can discuss with experts about the optimum term that will lessen the interest cost without increasing the burden on the monthly income.
Whatever be the option chosen, adequate consideration must be given to the conditions under which the option is to work. A particular finance option that did wonders to your friends finances, need not necessarily work in the same manner in your case. Instead of improving the situation, they sometimes back fire with serious consequences for the finances. Taking second opinion is always beneficial since it helps to test the validity of the advice offered by your lender.
Andrew baker has done his masters in finance from CPIT. He is engaged in providing free, professional, and independent advice to the residents of the UK.He works for the Secured loan web site uk finance world for any type of uk secured and unsecured loan please visit http://www.ukfinanceworld.co.uk
Here is a useful guide to Homeowner Loans. A Homeowner... Read More
There is more than one type of loan. Depending upon... Read More
Online payday loans seem to be popping up everywhere. A... Read More
Okay, so one day you wake up and realize that... Read More
A secured loan is a personal loan which is generally... Read More
Enervated by the hectic schedule at the work place, traveling... Read More
What are the avenues available to businesses with weak credit... Read More
Credit relationships in a social system form an intricate web... Read More
Bad credit secured loans are a relatively recent addition to... Read More
In his 1968 seminal novel, 2001: A Space Odyssey, Arthur... Read More
A secured personal loan is the generic term for a... Read More
You are trying to buy a new property and selling... Read More
Factoring has been practiced for centuries. The Romans sold promissory... Read More
Finding debt consolidation loans with bad credit can be quite... Read More
Trying to find good UK secured homeowner loans might seem... Read More
Listed below are some of the benefits of an unsecured... Read More
If you're looking for a secured loan, there are several... Read More
Car loans are easier to get by using an online... Read More
For American students, the U.S. Government came up with a... Read More
When you set out to borrow, you often come across... Read More
Some say that the automobile industry saved the economy during... Read More
Free Auto Loan TipsThe following tips should help increase your... Read More
The Internet has provided a whole new dimension to obtaining... Read More
Whether your payday arrives every Friday or every other Friday,... Read More
Looking for low interest debt consolidation loans can sometimes seem... Read More
Online lenders might be high quality, serious companies such as... Read More
The internet is a great place to find the right... Read More
Finding cheap loans isn't always easy? it seems like every... Read More
If you spend more than you earn on a regular... Read More
Have you been trying to find out what bad credit... Read More
Have you ever felt like you bought an auto and... Read More
Ever wondered what is a Tenant Loan? A tenant loan... Read More
If you're not familiar with the term, a secured loan... Read More
A business loan is designed for a wide range of... Read More
The opportunity to spend money is everywhere. There is no... Read More
If you're looking for a UK secured homeowner loan, you... Read More
Have you ever been short on cash? Has an unforeseen... Read More
Daughter's marriage or her studies? Son's Ambition? Want a House... Read More
Here are 8 things to consider, when evaluating lenders online:Website... Read More
Refinancing your loan is one of the best kept secrets... Read More
If you thought your home is worth nothing except for... Read More
Military members the price for serving your country and defending... Read More
For American students, the U.S. Government came up with a... Read More
Most Internet users are now extremely comfortable using the Internet... Read More
A bridging loan has many benefits, some of which are... Read More
Loans that are secured against property are called secured personal... Read More
The most important and difficult part in farm mortgage shopping... Read More
Looking for a cheap personal loan can sometimes be a... Read More
If you spend more than you earn on a regular... Read More
Outlined below are some of the reasons for choosing a... Read More
How online payday loans or cash advance loans work? Online... Read More
You can get a payday advance with cheap rates and... Read More
If you are a traveller by heart then perhaps every... Read More
We have all heard the stories about cash advance lenders... Read More
Plato said, 'We can easily forgive a child who is... Read More
The revolution that has affected everyone's financing technique is online... Read More
No matter what your credit history is the simple fact... Read More
With less than a week before she was to receive... Read More
Here is a useful guide to getting a bad credit... Read More
While most companies seeking venture capital initially think about angel... Read More
VA loans are basically mortgages or home loans geared towards... Read More
Listed below are some of the reasons for choosing a... Read More
In this second installment, we will further examine what kinds... Read More
Homeowner loans are useful ways to get the things that... Read More
So you are engaged. Congratulations. It was not easy. What?... Read More
So here's the situation: you are buying a car but... Read More
Loan |