Are you considering taking out a loan? If so, it’s essential to learn about the options that are available to you. Depending on the loan, it can be either secured or unsecured. In today’s blog, Quick Loans address how secured loans differ from unsecured loans and the advantages of each. We hope this post helps you determine which loan is right for you.
What Is a Secured Loan?
A secured loan is a loan backed with a financial asset that you own, such as your home, car, or savings account. This is called loan collateral, which the lender can use as payment if you don’t pay back the loan. When the borrower pays off the loan, their valuable asset will no longer be collateral. The purpose of this process is to motivate the borrower to repay the loan on time, because nobody wants to lose their home!
Because of collateral, secured loans can have lower interest rates and higher borrowing limits, and they are easier to obtain than unsecured loans.
What Is an Unsecured Loan?
An unsecured loan is exactly the opposite — there is no collateral on the money you borrow. The lender encounters a higher level of risk because there is no collateral, which could mean higher interest rates and lower borrowing limits.
Examples of Secured Loans
Here are some common types of secured loans:
- Mortgage loans
- Vehicle loans
- Secured credit cards
Examples of Unsecured Loans
The following are examples of unsecured loans:
- Payday loans
- Online personal loans
- Payday advances
- Student loans
- Credit cards
- Personal lines of credit
Quick Loans Note of Clarification: Personal loans can be secured or unsecured. If you have questions about these loans, call Quick Loans today at (417) 725-5010.
Which Loan Is Right for Me?
There are advantages and disadvantages of both types of loans, which can vary based on both the lender and the borrower. For example, if you have a weaker credit score, you’ll have an easier time getting a secured loan since the lenders take on less risk. Secured loans are also a better choice for borrowers who are on a limited budget. However, be aware that you usually have a longer approval process for getting a secured loan, and you have less time to pay the loan back.
Before you decide to borrow, it’s important to understand the difference between secured and unsecured loans so you can choose the right option for your financial situation. Before you apply for a loan, you should confirm that you can pay back your loan on time without hurting your budget.
Contact the Team at Quick Loans
Quick Loans is a lender of installment loans, installment title loans, and pre-owned auto financing. We provide excellent customer service, and we can custom-tailor a loan to fit your monthly cash flow. For any questions about our loan requirements or more information, contact Quick Loans today.