When you need money to finance personal needs such as the purchase of a home, car or your child’s college education, personal loans can really come in handy with supplying you with the necessary funds to make it possible. A personal loan can also be helpful for financial emergency situations, such as unexpected medical expenses, car repairs or other related bills. While the ways in which a personal payday loan can be used are just about limitless, there are generally two main types of personal loans that you can opt for; secured and unsecured.
Most borrowers are somewhat hesitant when it comes to choosing between the two because their decision will ultimately hold a huge bearing as to how much the loan will end up costing. However, in order to properly determine which loan would work better for you, you have to consider the characteristics of each type of loan and evaluate your own financial situation.
Secured vs. Unsecured Personal Loans
The biggest difference between secured and unsecured personal loans is collateral. When you opt for a secured personal loan, you are required to put up some form of security or collateral against the loan, which in most cases can be your property. Placing your home or property as collateral for a secured personal loan can often be risky in the event you default on the repayments. Why? Because the payday lender
has the legal right to seize and sell your property in order to recover their financial losses.
However in spite of the risk involved, many borrowers are still choosing secured personal loans due to the many advantages that come with them. For example, it is possible to avail lower interest rates and better loan repayment terms, such as extended repayment options with a secured personal loan. You can also choose between fixed and variable interest rates, and opt to pay nothing for the initial term of your loan.
Additionally, if you are a bad credit holder, secured personal loans can often provide you with the opportunity to rebuild your damaged credit score. As long as you continue to make your bad credit loan
repayments in a timely manner, lenders will be able to make positive credit reports to all of the major credit reporting bureaus. This in-turn will serve to improve your overall credit standing.
Unsecured personal loans also provide borrowers with certain advantages and disadvantages. One of the greatest benefits of opting for an unsecured personal loan is the fact that your property is never compromised in any way since collateral is not necessary for approval purposes. However on the down side, there are also higher interest rates and shorter repayment terms with unsecured personal loans due to the higher risk which lenders take on.
Additional Differentiating Factors to Consider
There are some additional differences to consider when deciding between secured and unsecured personal loans. Certain fees which go along with secured personal loans including appraisal fees and home insurance costs should be considered, as well as the extra paperwork that typically needs to be filled out. The requirements for an unsecured personal loan can also be more rigid in comparison to a secured personal loan. Borrowers with a steady source of income and established employment history will often have a better chance of securing the loan.
When deciding on the best type of cash advance
for your financial situation, it is important for you to consider all of the pros and cons for both secured and unsecured personal loans. After you evaluate your options carefully, you can make an informed decision and obtain the money you require to finance your personal needs.