Is there any one Who Define me-Secured Loan Vs Unsecured Loans?
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Posted on
12/18/11 Total Answers
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Answers-
secured is when they ask for collateral like a house or car or something, so if you can't repay the debt they take the collateral instead. An example of a secured loan is a mortgage.
Unsecured is when they don't ask for collateral. An example is a credit card.
Answer by :
Adam N On Date
2011-12-18 10:37:24
Often in our search for finance options, we are led into a crossroad where we have to make a choice between secured and unsecured loans. Both are equally alluring and put the borrower in a difficult spot. It is difficult to make up the mind regarding one particular finance option because each has their share of advantages and disadvantages. Depending on our financial situation, we will have to choose which loan is best for ourselves.
Lets understand the basic crux of secured and unsecured loans.
Secured Loan: A loan backed by assets (e.g. a car or property) belonging to the borrower in order to decrease the risk assumed by the lender. The assets may be forfeited to the lender if the borrower fails to make the necessary payments. From the creditor's perspective this is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property. Usually in secured loans the end use of loan amount drawn is given.
Following are the examples of the secured loans:
• Car Loan is taken to buy a new/used car.
• Home Loan is taken to buy or construct or rennovate a home.
• Car Overdraft is taken as a loan against mortgaging your car, but you can use the amount taken for your any personal use.
• Loan Against Property is also a form of secured loan where your pledge your asset and use the amount needed for consolidating your debt or foe any other end use.
• Secured Business Loan can also be secured if any asset (machinery, stock, raw material, building etc) are pledged against the loan amount required.
Unsecured Loan: With this type of loan, you do not need to put your collateral against the loan. The loan is given on the basis of your income and expense behavior.
Following are the examples of the unsecured loans:
• Personal Loans is the most common form of unsecured loans, which is referred to as all-purpose loans; they are ideal to buy a product for which you do not have ready liquidity.
• Unsecured Business Loan, as the name explains is a type of loan that doesn't require a collateral. It is typically at a higher rate of interest and is taken for a comparatively smaller tenor.
• Credit Card loans Credit card is the most flexible form of short-term borrowings with easy repayment options.
• Bank Overdraft is also a form by which you can avail unsecured finance from your bank for your business.
