| Generally any loan that you need falls in one of the two categories
of personal loans. You can either opt for an unsecured loan or a
secured loan depending
on how much you want to borrow. Secured
loans are loans for which the user has to provide some collateral
against the loan amount. The collateral can be your home, your bank
deposits or anything that has an equivalent or more value as the
loan value you are applying for. Make sure that the transaction
is valid by written agreement for the loan amount with the lender.
The main features of secured loans are as follows:
The loan amount is larger compared to unsecured loans. The lender
does not mind giving a larger amount of credit as they make sure
that your collateral is worth enough to cover the loan amount.
There is greater risk for the customer in this type of transaction.
In the event that the customer is unable to pay the debt, they would
have to forfeit the collateral provided to the lender. It becomes
essential for the borrower to be aware of this point at all times
and chalk out a plan accordingly, so as not to default on the loan
payments.
Secured loans have a more flexible repayment period as there is
greater security associated with the loan amount. The customer has
to make sure that he/she does not take a loan for an extended period
of time because money borrowed like this can be difficult to pay
off as the years go by. The interest that you may have to pay over
the repayment time can put a strain on your finances. Hence opt
for loans in which you can pay off the installments as soon as possible.
A secured loan is the best bet for people with a bad
credit rating. No one wants to be associated with bad credit
scores. But there may be occasions in which your credit score takes
a beating for no fault of yours. It could be a family emergency,
a business crunch or any contingency that may make it impossible
for you to clear your debts. These bad credit scores however prove
to be a deterrent to getting cheaper
loans. Usually people with a bad credit history have problems
acquiring a loan to suit their purpose. With online
secured loans, even people with bad credit scores can get this
type of loan if they have suitable collateral for the loan amount.
Lenders take less risk giving secured loans so these kinds of loans
are readily available.
There are some disadvantages of secured loans:
Valuation costs - Lenders have to assess the value of the collateral
that you provide. This assessment involves costs such as agreement
charges, consultation fees etc. The lender has to make sure that
your property has not been previously mortgaged and also gauge its
market viability. The costs of all these valuations need to be borne
by the customer and can add up.
Delay in the loan approval - Related to the valuation period is
the inevitable delay in the processing of the loan that happens.
This delay period can be cumbersome for someone who needs the loan
in a hurry or for an emergency.
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