Everybody needs money. If you are a parent of a growing family, you will do whatever is necessary to find a way to make money to provide security for your family’s future. Unfortunately, the expenses of modern-day living are personal loan slowly rising, and to pay for it, you would need a sizable amount of money.
Fortunately, several options are available to secure the money you need conveniently, and one of these options is Secured Personal Loans. But what is this type of loan, and why is it the best option to secure funds?
What are Secured Loans?
Secured loans are business or personal loans requiring you to use collateral, often equal to or above the amount you are borrowing. Secured loans allow lower interest rates and are therefore favoured because of the lower risk presented to the lender. However, if you stop making payments for the loan, the lender can seize the asset you used to get the loan.
Types of Secured Loans
Secured loans can be used for different purposes, and as long as you can offer any collateral, the chances of you securing the loan are high. Some of the types of Secured Personal Loan you can get are:
- Mortgage loan
- Vehicle loan
- Car title loan
- Life insurance loan
- Savings-secured loan
- Credit line
- Pawnshop loan
Whatever secured loan you are thinking of getting, remember that you can pay back the loan on time to avoid seizure of your collateral. So make sure that you discuss with a loan officer to get the monthly payment amount, loan tenure, and interest rate that would be best for you and your needs.
Advantages of Secured Loans
- Larger loan amount – Because you will be using any form of collateral to secure a loan, lenders allow larger amounts to be borrowed because they are confident you will be able to repay the loan to avoid seizure of the collateral you used. Either that or they will be getting their money back through the sale of your seized collateral should you stop making payments.
- Easier to get – Secured loans offer lower risk to lenders because of the presence of collateral. Hence, it is often easier to get approved than with unsecured loans, where an applicant’s overall credit profile is considered to decide whether a loan will be granted or not. An unsecured loan, on the other hand, is not protected by any collateral, so if you have a negative credit history, your chances of being approved are small, as opposed to secured personal loan, where you may still be able to qualify for a loan provided you can provide security.
- Build a credit line – One of the types of secured loans is a savings-secured loan wherein you would offer the amount you have saved in your savings account as collateral. This type of loan will help you build credit. And because you will be paying for your loan, as long as you can make prompt payments, your credibility as a lender will increase, allowing for better terms should you need to secure another loan in the future.
- Longer repayment terms – Some types of secured personal loan, like mortgage loans, may be secured through longer repayment terms. This may be beneficial to you because not only will you be making lower monthly payments, but the value of real estate properties will appreciate over time, making the amount of your collateral higher.
- Lower interest rates – Some types of secured loans might offer lower interest rates because the lender will be taking on less financial risk through collateral. This makes lenders confident that you will be paying your loan promptly.
Before you take on a secured loan, make sure to compare as many lenders as possible to find the right loan that will not only meet your needs but will be something you could afford. Paying at the right time will increase your credibility as a borrower and may result in easier loan processing the next you need it.
Author Name: Steffy Alen