Often we have to take a loan for some work or the other. Banks and financial institutions mainly give two types of loans. Of these, the first is a secured loan and the second is an unsecured loan. Here we are giving you detailed information about both these types of loans.
What is a Secure Loan?
In simple language, a Secured Loan is a loan for which you have to give some mortgage. Suppose you need money, then you borrow money on interest by mortgaging gold, this is called a secured loan. That means you have taken a loan against your asset.
It is called secure because your gold is kept with the financial institution as security. If you do not repay the loan, then you can withdraw money by selling your gold. Apart from gold, your house and your car can also be deposited as collateral.
What is an Unsecured Loan?
The opposite of a secured loan is an unsecured loan. In this loan, the bank or financial institution does not ask for any kind of collateral to give you money. This means you do not have to mortgage anything.
In such loans, the debtor has more resources, hence generally the interest on unsecured loans is higher. However, an unsecured loan is given to you only on the basis of your credit history. Unsecured loans like credit cards, personal loans, student loans, etc.
Which one is right for you?
Secured loans are easily and quickly available. Generally, lenders do not hesitate to give secured loans because they have some of your belongings as collateral. In a secured loan, you get more repayment time and the interest rate is also lower. Apart from this, you also have the possibility of getting more loans.
At the same time, you can get an unsecured loan quickly but it charges higher interest rates. Also, the limit for loan repayment is less. If we look at the features of both loans, people like more secure loans, in such a situation, what will be the best loan option for you depends on your need to take the loan. However, if you do not have any asset then unsecured loan can be a good option for you.
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