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When you are looking to get any type of loan, you will always be faced with dilemmas and choices. Whichever loan you decide to take out, the options surrounding each one can often be overwhelming. However, the first thing you must decide is whether your loan will be secured or unsecured. Every loan available in the market today is one or the other, so what is the best?
Unsecured loans
Although unsecured loans pose more risk to lenders, they are widely available and come in several different forms such as credit card or personal loans. Also, they typically do not require any form of collateral or assets and can have more flexibility in terms of payment options.
But for all these advantages even the highest loan amounts are lower than a secured loan. Rigorous credit checks are conducted to prove that you are creditworthy and able to repay the loan in full. In addition, if you have a low income or have had credit problems in the past, it may be difficult for you to get an unsecured loan.
If successful, you’ll need to make sure your budget can handle the reimbursements. Many unsecured loans have a higher interest rate that may cost you more in the long run. If you miss any payments or are unable to pay off the total amount, it will affect your credit rating making it more difficult to borrow in the future.
Secured loans
A secured loan is the type of loan that is protected by an asset of value or a security item. It’s less risky for lenders who can offer larger loan amounts because, as the name suggests, you’ll be providing the “security,” whether it’s a home or a car, to help borrow money.
Although credit checks are still usually applied to ensure a creditworthy background, the process is more focused on the security that you can provide. The lender sees the high-value item being offered against the loan as a guarantee that you will repay the loan in full and thus retain ownership of it.
However, it does mean that the lender has the right to take possession of the item if the loan is not repaid in full, including fees and costs. This will affect your credit score in the same way as if you defaulted on an unsecured loan.
A secured loan on your car
One of the easiest and quickest ways to get more money is to get a secured car loan. Often known as a history loan, the process involves taking out a loan secured with your car being the valuable collateral against it.
There are many reliable lenders available to you and a few of them have already helped thousands of customers withdraw money from their cars and made the process easy and simple. Some companies do not offer formal credit checks, so as long as you own your car and are free of financing, there is no reason they can’t help you.
It is important that you do your research before committing to a loan company. Many offer hidden fees and charge you penalties for paying off the loan early. This can come as a nasty surprise to many people once they are already tied in the knot.
