When we look for finance options, we notice that there are thousands of options available to us. However, two of the main avenues to go for are secured loans and unsecured loans. Both have their pros and cons and it can be difficult to choose between them. Hopefully, the following information will help you to make that decision.
Secured Loans vs. Unsecured Loans
When looking for secured loans, financial experts have reported these are the most common, not in the least because there are many different types (house loans, payday loans, title loans, pawn loans and so on). Loans secured against a home offer the highest sums of money. Unsecured loans are quite new, however, and became available as more and more people did not own homes and were not able to get any type of finance. However, to this day, only people who can prove that they are worthy creditors will be able to get unsecured loans, with the exception of extremely high interest doorstep collection loans.
Misconceptions about Secured Loans
A lot of people have the wrong idea about secured loans. For instance, you do not actually have to vacate your property if you take out a secured loan on it. All you do is transfer a piece of ownership right. Your home is still yours to live in, unless it gets repossessed because you don’t make the necessary payments.
If you take out an unsecured loan and you don’t make repayments, you may still lose your home. This is because a lender could then take out a lien on your home, or sue you in another way that will force you to sell in order to repay them.
Because of this, more and more people now opt for secured loans.
Requirements to Obtain a Secured Loan
Secured loans are more forgiving of bad credit. However, lenders are becoming more and more stringent. The exception is in a secured loan that is not secured against your real estate property, such as a payday loan or title loan. There are a number of other requirements as well, including:
- The collateral must be lien-free, regardless of the type of secured loan you are looking for.
- You must be in employment and be able to prove your income.
- You’ll have to be able to identify yourself.
- You must have proof of residency.
- You must have a bank account.
Most people apply for secured loans rather than unsecured loans because they are easier to obtain, have more variations and have better terms. Regardless of what you decide to do, it is of vital important that you shop around in order to find the best possible deal. The difference between various lenders is huge and could literally save you thousands over the overall term of your loan. There is a great deal of information available online to help you learn more about the difference between the various constructions and you should use this before you agree to any terms and conditions.