Choosing Between Secured and Unsecured Loans
Human beings are creative in nature, and they use this creativity in order to find solutions for life's problems. Paucity of funds is one such problem and one of the solutions available to us is loans.
It is not always the people who have financial problems who go in for loans. People who want to expand their dwellings, or who want to live a sensational and adventurous life by traveling far and wide, and even those who just want to consolidate their liabilities, all look for loans.
Secured and unsecured loans are the two types of loans available in UK. In secured loans, the lender insists that the borrower give as a collateral any of their assets, namely their home, their car, stocks, or any other asset of high value. If the borrower fails in repayment, the lender will recover the dues by selling the asset thus given as collateral.
Advantages of a secured loan are that the money lent is usually more than in the case of an unsecured loan. Also, the repayment period is longer. The lender also feels safe as the loan has the back-up of an asset. Therefore the interest rates are also comparatively cheaper. Even if the borrower has a weak credit history, a secured loan may be considered since it has the back-up of an asset.
In an unsecured loan, no asset is involved. The borrower's credit-worthiness is assessed based on their present income, their other loans, how they are currently repaying their other loans, and other factors. Once this assessment is over, the lender decides the loan amount, the repayment period, and the rate of interest. In this case, the money lent is usually less than that in the case of a secured loan, the repayment period is shorter, and the rate of interest is higher. The lender may insist on a guarantor, for if the borrower does not repay the loan, the lender recovers the loan amount from the guarantor.
The advantages of an unsecured loan are that since no collateral is involved, there is no question of the borrower losing the asset. The borrower need not possess any asset to get the loan, and since the repayment period is relatively short - they can quickly get rid of the burden of the loan if they plans their finances properly and repay the loan comfortably.
Starting a business or business expansion may also be a reason for a person to borrow. But borrowers should keep in mind that raising a loan should only be for a temporary period. They should not become habitual borrowers because it become a vicious circle if they get entangled in borrowing.
It is usually said that lenders are very strict. People should plan their finances meticulously and follow their plans strictly. Loans must be taken only if it is absolutely necessary. If loans are raised, there should be fool-proof plans for repaying on time. - 23208
It is not always the people who have financial problems who go in for loans. People who want to expand their dwellings, or who want to live a sensational and adventurous life by traveling far and wide, and even those who just want to consolidate their liabilities, all look for loans.
Secured and unsecured loans are the two types of loans available in UK. In secured loans, the lender insists that the borrower give as a collateral any of their assets, namely their home, their car, stocks, or any other asset of high value. If the borrower fails in repayment, the lender will recover the dues by selling the asset thus given as collateral.
Advantages of a secured loan are that the money lent is usually more than in the case of an unsecured loan. Also, the repayment period is longer. The lender also feels safe as the loan has the back-up of an asset. Therefore the interest rates are also comparatively cheaper. Even if the borrower has a weak credit history, a secured loan may be considered since it has the back-up of an asset.
In an unsecured loan, no asset is involved. The borrower's credit-worthiness is assessed based on their present income, their other loans, how they are currently repaying their other loans, and other factors. Once this assessment is over, the lender decides the loan amount, the repayment period, and the rate of interest. In this case, the money lent is usually less than that in the case of a secured loan, the repayment period is shorter, and the rate of interest is higher. The lender may insist on a guarantor, for if the borrower does not repay the loan, the lender recovers the loan amount from the guarantor.
The advantages of an unsecured loan are that since no collateral is involved, there is no question of the borrower losing the asset. The borrower need not possess any asset to get the loan, and since the repayment period is relatively short - they can quickly get rid of the burden of the loan if they plans their finances properly and repay the loan comfortably.
Starting a business or business expansion may also be a reason for a person to borrow. But borrowers should keep in mind that raising a loan should only be for a temporary period. They should not become habitual borrowers because it become a vicious circle if they get entangled in borrowing.
It is usually said that lenders are very strict. People should plan their finances meticulously and follow their plans strictly. Loans must be taken only if it is absolutely necessary. If loans are raised, there should be fool-proof plans for repaying on time. - 23208
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