Secured Loans Or Non-Secured Loans?
Lending and borrowing are two of the oldest transactions in the history of humans. Lending is a simple transaction in which a person (lender) lends some money to another person (borrower) on certain terms and conditions. These terms include the payback duration and the rate of interest applicable on that loan. The concept of giving loans is same even in current times but the procedure of lending has become a bit more complex due to rules and regulations involved in this process.
Basically, there are two types of loans available in market today. One is called secured loan and the other is called unsecured loan or non-secured loan. Secured loan is something in which the lender is assured to getting his money back since he keeps some asset of the borrower as collateral. This asset can be his home, car, jewelry or any other tangible and precious thing.
This way, the lender has low risk associated with the loan since he can always recover the money lent to the borrower in case the borrower defaults on his payment. Since the risk of loan is low, the loan is also cheap and interest rates are low.
The second kind of loan is called unsecured loan or non-secured loan. In unsecured loans, the lender gives money to the borrower purely based on his past financial history. This is also called credit history. There is no concept of collateral involved in this kind of loan. Since these loans are relatively riskier for the lenders, the rate of interest is higher. If the credit history of the borrower is good enough, he may get a better deal. For a person having a bad credit record, the rate of interests can be very high.
The type of loan which should be applied would depend upon the credit history and the need of the borrower. The borrower should always try to get an unsecured loan first since it does not involve putting in the collateral. In case the credit history of the borrower is no very good then he can opt to apply for a secured loan.
Basically, there are two types of loans available in market today. One is called secured loan and the other is called unsecured loan or non-secured loan. Secured loan is something in which the lender is assured to getting his money back since he keeps some asset of the borrower as collateral. This asset can be his home, car, jewelry or any other tangible and precious thing.
This way, the lender has low risk associated with the loan since he can always recover the money lent to the borrower in case the borrower defaults on his payment. Since the risk of loan is low, the loan is also cheap and interest rates are low.
The second kind of loan is called unsecured loan or non-secured loan. In unsecured loans, the lender gives money to the borrower purely based on his past financial history. This is also called credit history. There is no concept of collateral involved in this kind of loan. Since these loans are relatively riskier for the lenders, the rate of interest is higher. If the credit history of the borrower is good enough, he may get a better deal. For a person having a bad credit record, the rate of interests can be very high.
The type of loan which should be applied would depend upon the credit history and the need of the borrower. The borrower should always try to get an unsecured loan first since it does not involve putting in the collateral. In case the credit history of the borrower is no very good then he can opt to apply for a secured loan.
About the Author:
The author is an expert on loans and suggests on different types of loans including secured loans and non secured loans.
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