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The global financial market is blooming with the lenders & the financing companies offering many different loan types. Broadly, all these instant cash loans can be categorized into 2 primary classes – Secured loan types and unsecured loan types. Only when you have a better understanding of the terms, concept, and differences in between these two classes of loans, you will know which kind of loan is most suitable for you. Irrespective of the financial crisis and the type of loan you are planning on availing, there are a few pointers that you should know before making any financial decision.
It is imperative that you analyze all your circumstances before you decide to avail any quick cash loan. You need to start by understanding the pros and cons of the different loan types, and then choose the one that is most suitable for you. The first step should start with checking your creditworthiness, which is reflected by your credit scores. Though there are many loans for poor credit scores also, having a firm grip & knowledge about your credit record can help you ease your financial decisions to a great extent. In this blog, we go learn about the secured loans and how different they are from the unsecured bad credit loans so that it could help you make a suitable decision while borrowing a loan.
As evident as it is, when you are borrowing a secured loan, you will have to provide collateral to the lender in the form of security. The primary purpose of taking a definite surety is to avoid any loss to the lender, if in the case of a loan payment default by the borrower. Usually, the collateral will be of a value that is more than or equal to the amount of value that is being borrowed as a loan.
The most common types of secured loans include the mortgage loans - where the house will serve as the collateral; Auto loans – where the vehicle you are going to purchase will serve as the collateral; Title loans – the already existing vehicle’s title will be used as collateral; Secured credit – where the secured credit card will have an amount deposited that is equal to the borrower’s credit limit and for which the lender will have access.
The banks do not offer short term loans with bad credit i.e. your bank loan application will be rejected outright if you have a low credit score, if you are looking only for a small amount of money as a loan, or if you do not have any proper collateral to place as surety. So, if you need to borrow a secured loan from the bank, or more commonly the secured instant cash loans from a lender, you will have to place appropriate physical collateral for it. Placing proper collateral will ease your possibilities of qualifying & getting your loan application approved, even if you have a poor credit score.
As long as you keep repaying the loan amount on time as per the scheduled plan, the collateral will be safe with you, and you also get to build your credit record. However, if you default a payment, or if there is continued non-payment, the lender may seize your collateral. So, if you have availed a title loan or an auto loan by placing an automobile or its title as collateral, and if you default a payment, there are chances that your vehicle placed as collateral may be confiscated by the lender; or if you have availed a mortgage loan, there are chances that the lender may take possession of it if you don’t repay the loan. Also, a defaulted loan payment could adversely affect your credit scores.
Unlike the secured loans, the unsecured loans do not need any collateral or guarantee to be placed while borrowing them. The lenders provide the unsecured loans to you just by believing your word and your creditworthiness. However, most lenders also provide the unsecured loans for bad credit with no guarantor even for people who have a poor credit score, without requiring a surety. Although these unsecured loans do not come with the risk of losing an asset, the risk level is high for the lenders with the unsecured loans, they come imposed with relatively higher interest rates than the secured loans, are much difficult to be approved, and may have shorter & less favorable terms.
If you have decided that you need to borrow a loan, you should start by analyzing your requirements, circumstances, and then choose the most suitable loan from a reputable lender. Knowing your credit scores could help you to a great extent in choosing the right loan. Understand your situation properly, explore well, and gather all the required information before you make a final decision. At FleetQuid, you can apply safely for the suitable loans even for poor credit and get connected with reliable lenders who provide secured loans and different unsecured loans. Use the funds for genuine purposes, repay on time, overcome your financial issues, and improve your credit scores.