Secured and Unsecured Loan’s Similarity and Difference
January 4, 2009 § Leave a comment
If you are looking for advance money, the first thing that you should know is the types of loans. We have two kinds of it. They are the secured and unsecured loan. Knowing the differences and similarities between the two will help you decide which one you should apply for and which one will suit your needs.
There are quite a few similarities and differences between secured and unsecured loan. In this post, I’ll suffice you the basic similarities and differences of the two.
What Makes them Similar
Secured and unsecured loan are ways to get an advance money or what other people call “credit”. That’s the most obvious similarity between the two. You can use the advance money either for yourself, for your business’ expenses or for any other thing. It actually doesn’t matter. What matters is getting a secured and unsecured loan will help you in your financial problem.
The main difference between secured and unsecured loan is the need of collateral in the former. You cannot ask for a secured loan if you don’t have any property to be used as collateral. Plus, the collateral should have the same amount with the money your lender is going to lend you.
Why is it necessary that your collateral has the same amount with the loan? If ever you are not able to pay back on or before the due time, the collateral will automatically transferred to the possession of the lender. Of course your lender won’t agree if your collateral is less than the amount of loan he has lent you.
On the other hand, unsecured loan lenders don’t require any collateral. What you need here, is a good credit standing. It also has lower interest rates in comparison with the secured one.
Now that you know the difference between secured and unsecured loan, I think you’re ready to look for the loan that’s the best for you. We can say that it’s the best if it is sufficient for your financial needs and if you won’t be paying large amount of money in the future.
If you are not yet sure about applying for loans, doing some research will be a great help to minimize your burden.
And for my last tip, don’t borrow huge amount of money if you’re doubting that you can pay for it on its due time.