Personal loans can be an effective solution to your temporary financial needs. The two main types of personal loans are secured and unsecured. Both types have positive attributes and then some aspects that you may want to reconsider. The following is a comparison of the two loan types. You should be able to decide which option is best for you after you review the comparisons.
Secured vs. Unsecured
The main difference between a secured and an unsecured loan comes down to whether you are required to offer the lender some form of collateral in order to receive the loan. An unsecured loan is one that does not require the extra good-faith offering. A secured loan, however, may require you to have to allow the lender to hold your home deed, automobile title, stock certificate or something different. What you end up offering will depend on the type of lender you’re visiting and what your credit profile looks like.
Pros and Cons of Secured Loans
A secured loan can be good for both you and the lender because it allows them to offer you money, and it gives you the opportunity to build trust with them. Once you do one deal with the lender and repay the loan, they’ll have a new sense of trust for you. That sense of trust may get you an unsecured loan next time. The downside of the secured loan is that you may have to part with something valuable during the term of the loan. You may have to put your car or your home up as collateral until you fully repay the loan. As long as you have a steady stream of income before you take the loan, and develop a solid repayment plan, you shouldn’t have to worry about parting with your goods.
The Pros and Cons of Unsecured Loans
Unsecured loans also have their pros and cons like secured loans do. A huge plus of getting an unsecured loan is that you don’t have to pledge any of your personal property to receive a loan. The lender trusts you with the funds, and you repay him when you get the money. That’s all. What may happen, however, is that the lender may charge you a higher interest rate than normal, especially if you are a high-risk customer. You may not appreciate the higher interest rates, but you will get the opportunity to get the funds you need for your financial needs.
Which One Is Right for You?
The type of personal loan you choose depends on your personal situation. Secured loans may be better for you if you know you’re not going to default on a loan payment, and you don’t mind letting go of something valuable for a little while. Unsecured loans may be better for you if you want more financial freedom.
How to Search for a Good Loan
The most important thing to remember during the hunt is to make sure that you get a good loan. To do that, you have to use a reputable lender. Conduct thorough research before you apply for a loan. Check the Better Business Bureau and other review sites for information about how the lender treats its customers. Contact the lender so you can gauge their personality. Only apply with a provider that you feel has your best interests at heart. Choosing the right lender will ensure that you have a positive experience.