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What is the Difference between an Unsecured Personal Loan and a Secured
Personal Loan?By
Beth Pardue
This is a common question that many consumers have. Many people
do not realize that there are even different types of personal loans. Each type of
personal loan, secured and unsecured, have different requirements.
We will look at the requirements for a secured personal loan first. The name
“secured loan” pretty much sums it up, to obtain a secured loan the borrower is
required to provide some kind of collateral to secure the loan.
The most common forms of collateral used to secure loans are personal property such
as your home, land or automobile. When your home is used as collateral, you will
often hear the loan referred to as a home equity loan or a second mortgage loan.
Personal loans can also be secured with stocks, bonds, certificates of deposit, a
savings account, etc.
Lenders tend to be more flexible when granting secured loans. Usually the borrower
is given a lower interest rate and longer terms to repay the loan compared to an
unsecured loan. The downside to a secured personal loan is if you default on the
loan and fail to repay it, the collateral used to secure the loan can be seized by
the lender.
If you do not have any collateral to put up for security, then you would not be
able to qualify for a secured loan. On the other hand, and unsecured loan does not
require any collateral. That is why unsecured loans are a great option for
non-homeowners.
The requirements for an unsecured personal loan rely on the borrower’s credit
history. Since there is no collateral securing the loan, the lender has to base
creditworthiness of the borrower on his or her past credit activities.
The higher a credit score the borrower has the more likely for approval they will
be. A good credit score can also guarantee a higher loan amount and a lower
interest rate. If you have poor credit, you could still qualify for an unsecured
loan but expect to pay a much higher interest rate.
There are some really great deals and interest rates on unsecured loans these days.
But all in all, usually the limit on an unsecured loan will be lower than the limit
for a secured loan and the interest rates are usually higher. Visit
http://www.easy-approval-personal-loans.com to apply online for a unsecured
personal loan today or to learn more.
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