Should you go for a secured or unsecured loan?
Whether you like it or not, you are probably going to make a choice between a secured or unsecured loan when the time comes and you need some additional capital to inject into a business, buy furniture for your business premises or simply buy a house or a car. This is a question that thousands of UK borrowers deal with on a daily basis. Of course, the type of loan you settle for is informed by a number of factors. These are:
- Whether you have collateral or not
- The amount of money you need
- Your credit score history
- The period you wish to take out the loan
- The purpose of the loan
In most cases, individuals with collateral, a good credit history and in need of a huge sum of money will always go for a secured loan. This is because secured loans tend are less risky to the lender and the fact that there is collateral make it easy for lenders to advance a substantive amount of money. In the event that the borrower is unable to repay a secured loan for one reason or the other, the lender can always sell of the property and recoup their money. Secured loans are instrumental for those seeking buy a house, business furniture, stock and so on and so forth.
What’s more? Even if your credit score is not perfect or average, you can still avail a secured loan provided that you have collateral. Which brings us to the next type of loan – unsecured loan. From the name, this type of loan does not require collateral to be approved. It is instrumental for individuals who need cash for a short period of time till they get money say on the next payday. Application for unsecured loans are pretty simple and straightforward. Approvals are known to be done within 24 hours.
The downside to taking out an unsecured loan is that they attract high interest rates. This is because lenders consider them risky due to lack of collateral. To mitigate risk on their side, lenders tend to apply high interest rates. At the end of the day, the decision to go for secured or unsecured loans is dependent on the amount of money you need, your salary, your credit score status, the period of repayment, the purpose for which you need the money and so on and so forth. For instance, if you need cash to buy a car or a house, it would be prudent to go for a secured loan. On the other hand, if you simply need cash to sustain you till the next payday, an unsecured loan would suffice!