Secured vs Unsecured: Know the Differences

Posted on by Ink Well Mag

Personal Loan in OgdenGetting loans from the bank or lending agencies is becoming easier as there are more ways to get money instantly (sometimes regardless of credit rating). While the requirements have become easier, loan types remain the same — Secured and Unsecured.

Below are the basic differences (and risks) of different types of loans.

Secured loan

A loan is classified as secured when a lender like Loans For Less has collateral in a form of cash, car and even your own home. Secured loans are less risky for lenders because there is a way to guarantee that the cash borrowed can be repaid. Thus, the interest rates for secured loans are lesser and cheaper as compared to unsecured ones.

However, despite lesser interest rate, the risk of secured loans is shouldered mainly by the borrower. If the borrower fails to pay the amount on time, the interest rate would be carried over for the first month. Should the borrower again fail to pay, then the asset used as collateral would be repossessed.

Unsecured loans

Unsecured loans are made when the lender has no “security” to hold on to. This makes the interest rates higher and more expensive for the borrower. While no asset of the borrower is at stake, unsecured loans have the tendency to pile up if left unpaid. Failure to make payments on time can incur huge damages to one’s credit damage.

While the lender risks the possibility of not getting their money back, the risks are higher for the borrower. The lender can also go to court and sue the borrower in court in hopes of getting their money back.

Read This  Guide to Buying a Split System Air Conditioner

There would always be risks involved regardless of the loan types. In order to know which one works best for you and your financial capability, consulting with a professional lending agency in Ogden can help you get the right type of cash loan for you.