There are different kind of loan when it come to loan application. We have Unsecured loan and secured loan. However,loan can be a great way to get money when you need it either to improve your cash inflow, buy assets and other purposes.
Even though loans can be helpful when you intend expanding your business or cash inflow, it’s important to consider loan installment, Interest rate charges and fees when applying for any kind of loan with either from banks, credit unions, and online lenders
Secured vs. Unsecured Loans
Understanding the differences between the two is an important step in achieving financial literacy—secured loan requires borrowers to offer collateral, while an unsecured loan does not.
There are yardsticks used to assess a borrower’s ability to repay the debt, and can include the borrower’s situation as well as general economic factors which include:
1. Character – can include credit score, employment history, and references
2. Capacity – income and current debt
3. Capital – money in savings or investment accounts
4. Collateral – personal assets offered as collateral, like a home or car
5. Conditions – the terms of the loan
Our topic will be on Unsecured Loan and secured Loan ,Types and how they work.
1. Unsecured loan
When a loan is approved without the need for collateral rather than relying on a borrower’s agree to pay back the loan. Borrowers qualify based on their credit history and income.Lender will also want to be sure that you have enough income to repay any new loans. When you apply for a loan and how you handle credit card debt or how your loan from a bank was paid at past.
Types of unsecured loans:
Unsecured loans include personal loans, student loans, Unsecured credit cards and Debt consolidation loan
2. Secured loan
A secured loan is normally easier to get, as there’s less risk to the lender. If you have a poor credit history or you’re rebuilding credit because borrower normally make use of an asset as collateral such as your home or car because losing your home or car is a powerful motivator to pay back the loan, and avoid repossession or foreclosure.
Many secured loans offer lower interest rates than unsecured loans, it’s also the most
common way to borrow large amounts of money
Types of Secured Loans
Here are the list of secure loan:Mortgage , Car loan, Home equity loan, Home equity line of credit,Secured Credit Cards,Boat Loan,Recreational Vehicle Loan.