Secured Loan vs. Unsecured loan
Difference Between Secured and Unsecured Loans
If you are considering borrowing money, you must make a decision regarding choosing a secured or an unsecured loan. Yet, many people have never taken the time to fully understand what the differences between these two types of loan really are.
The only way of being sure that you are making the right choice is to know what the key differences are. You can then see exactly what you need to do. Here, we briefly explain the differences between secured loans and unsecured loans.
What Is a Secured Loan?
A secured loan is when you borrow money and back it with any sort of collateral. This is typically something valuable such as a home or a car. Therefore, a mortgage is a type of secured loan that sees the lender take security over the property being purchased.
In this type of cash loan, the lender has the right to legally take over your collateral in case you are unable to repay the loan. With 1 million Australians said to be on the verge of defaulting on mortgage payments, it is easy to see why this is a type of credit you should go into lightly. You need to fully understand the risks as well as the benefits.
Mortgages and car loans are the most common kinds of secured loan. However, a loan could be secured against just about anything that is valuable enough to cover the amount being borrowed.
If you sign up for a secured car loan, your lender uses your car as security. This implies that if you default on your cash loan, the lender can sell your vehicle to recoup the funds. A few benefits of taking secured loans include a lower interest rate and the chance to borrow a higher amount.
It can also be easier to arrange. Since the lender is taking security over something valuable, they are usually a little bit less concerned about the risk of the borrower defaulting.
What Is an Unsecured Loan?
On the other hand, an unsecured loan doesn’t see anything put down as security. The lender gives money to the borrower purely based on their history and their capacity to repay the money.
This means that it is a higher risk type of loan. If the person can’t or won’t make repayments on it then the lender could have a lot of problems in trying to recover their money.
Nothing happens to your collateral in the case of borrowing on an unsecured loan, because the lender has no charge over it. They accept the risk of lending money without anything as security.
These loans usually come at a higher interest rate than the unsecured type. In addition to unsecured car loans, some common kinds of unsecured loan include student loans, credit cards and personal loans.
Benefits of Secured Car loans
A secured car loan is a popular type of car loan because it’s for anyone who intends to purchase a vehicle. When you borrow a secured car loan, the lender sets a fixed loan term as well as a fixed interest rate. The borrower knows every detail about the car loan repayments and is fully aware of the duration of the loan term.
The key benefit of borrowing a secured car loan is that you can get a lower interest rate, which is not the case in an unsecured car loan. The lender is able to offer you a better rate because if a borrower fails to pay back the loan, he can legally acquire the vehicle. The lender can either keep the car or sell the vehicle to recover the loan amount. He has a registered right to reclaim your vehicle if you fail to make repayments for the duration of the loan term.
However, once the borrower successfully repays the loan, the lender removes the registered interest over the car and the car is 100% your property. In the event of any mitigating circumstances that imply you can’t meet your next repayment, discuss with your lender before the payment falls due for arranging a repayment break.
With online banks and lenders coming into play, it’s great to benefit from a competitive market to get the best possible secured car loan. Most lenders make sure you get good interest rates so you have enough time to make the entire repayment.
Secured Vs Unsecured, Which One Should You Choose?
As we have seen, there are a number of factors to take into account when looking for the right loan. How will you know which one is best for you?
The first point to consider is whether you have something suitable that you could use as security. For example, do you have a car that is worth enough money to be used in this way? It needs to have a high enough value to let you borrow what you need against it.
Then you should think about the rate you can get and how easy you want the process to be. Taking everything into account, it is often the case that getting a secured loan turns out to be the perfect move.
Applying for a secured car loan in Australia is the smartest options and the process is made easy by Hock Your Ride. There is no tedious paperwork or long phone calls to discuss the terms and conditions. Thinking about getting a car loan? Get in touch with us if you want to know more about how you can borrow a secured auto loan that best fits your needs.
We Loan Cash Fast Against Your Ride. Contact us today and get your Cash Loan now!
We Loan Cash Fast Against Your Ride. Contact us today and get your Cash Loan now!Apply Now