In the case of secured loan, borrower may get loan under very favorable terms and condition.
If the debt is not cleared properly, then creditors have full proof right to sell the asset and get the amount back without any kind of financial risk.
Mortgage security: Borrower can keep their home as a security to the creditor. In that case, foreclosure against the property takes place, if the loan not repaid, and the repossession of the property also does not wait for any court order, if loan repaid on time.
Account Security: If any borrower has the savings or checking account while going for secured loan, then amount in the account serves the purpose of collateral. In that case money is frozen, and when the loan repaid completely, the frozen portion is freed.
Car security: People can keep their car as a security deposit.
Other security: Few people keep their jewelry, even few valuable documents like bonds, stocks etc, as an asset to the creditor.
As long as you're making repayment properly, you can easily use your car or home as usual. The legal possession then happens, if you aren't being able to pay your amount anymore.
Interest of secured loan depends on the amount you borrow from the lender, which is known as Annual Percentage Rate or shortly A.P.R. This A.P.R determined by the creditor varies on individual basis, so it is better to compare rate of secured loan in different A.P.Rs, and then decide.
Initially, the creditor analyzes your loan repayment ability and other circumstances of yours. They see the equity of the property you're depositing as a security. Depending on all the situations, people may borrow up to 125% of the property value.
This loan generally serves the purpose of borrowing large amount.
Collateral Required: Home or property is mainly taken as an asset due to the higher value of it.
Interest rate: By keeping home as security, borrower can easily avail the benefit of lowering the repayment and interest amount
If your debt amount is taking your night sleep away, debt consolidation loan is available for you. This loan serves the purpose of lower your monthly repayment amount, as it becomes long term debt.
Types of Debt Consolidation: It is of two types:
1. Secured Debt Consolidation loan: This loan amount is given to the borrowers with poor credit history or high debt amount by keeping any of their assets, preferably the house as collateral
2. Unsecured debt Consolidation loan: In that case, there is no need to keep any security deposit.
By using this loan, many of your personal needs can be fulfilled in a lower interest rate.
You can use the loan amount:
Loan security: As a security for personal loan, borrower can keep the assets as collateral like:
Secured loans are also available for people with bad credit history. In this case, people who don't have good credit score are also eligible for secured loan, if they can deposit any asset as a security. Most of the times, automobiles or real estate becomes the most preferable collateral for the lender.
Interest Rate: In the case of secured bad credit loan, the interest rate is lower in comparison to rate for the unsecured bad credit loan.
Unlike any other secured personal loan, this kind of a loan is available where you get the loan against any asset.
Purpose: You can use this loan for the purpose of:
Interest Rate: Interest rate for business loan is of course lesser than unsecured business loan.
Benefit: You can get the other benefit in this loan.
Criteria: Before lending loan to the borrower, creditor no doubt will find the feasibility of the business proposal for any new business set up or expansion of the existing business.
Buying a new car with the help of secured loan can prove the best deal nowadays.
You must consider few things before lending loan:
Collateral preferred: As any other secured loan, in the case of secured car loan, people have to deposit any of the assets as collateral. Mostly, borrower's old car is accepted, but one can also keep any other asset as collateral.
Interest Rate: Its low interest rate makes the repayment easy for the borrower.
It is just opposite to secured loan. For this loan, borrower doesn't have to keep any asset as collateral to the creditor
Benefit from borrower end: No security deposit as collateral takes place, and no hassle of repossession also exists.
Benefit from lender end: Though it is not secured by any collateral, but still lender can take any legal action against the borrower, if the default in repayment takes place. This process can make the borrower's life miserable.
Interest rate: Interest rate for unsecured loan is higher than the secured loan.