Secured loans are loans which are given against collateral. The collateral allows the bank to be safe and recover their money in the event of the borrower not being able to repay the loan amount. There are different types of secured loans like; Loan against property, Car Refinance etc
These loans are more popular with both; the lender and the borrower plainly because the lender is safe with the collateral set against the loan and the borrower can get a loan with a longer tenure, lower interest rate and extended repayment period. For unsecured loans, it is quite the opposite. There is no collateral because of which the lender applies higher interest rates and offers a smaller tenure for repayment.
There are certain advantages associated with taking a secured type of a loan. These are;
Loan Amount – You can expect a higher amount disbursed by the lender in a secured loan scenario. This is because the lender has a cushion in form of your mortgage in the event of you not being in a position to repay the loan amount.
Loan Tenure – In a secured loan, the lender often allows the borrower more time to repay the loan. Yes, the tenure is higher when compared to that of an unsecured loan.
Rate of Interest – Since the lender is at low risk in a secured loan scenario, they provide lower rate of interest to the borrower. This helps the borrower and provides ease in repaying back the loan amount. The same cannot be said if it’s an unsecured loan.
EMI is low – The monthly EMI in case of a secured loan is lower than that of an unsecured loan. This is because of the combination of longer tenure along with a lower rate of interest.
Loan Terms – For an individual to get a secured loan, he/she needs to make sure that the credit score is good. If it is not as per the requirement of the lender, they might still get the loan approved when they keep something as collateral. Although the rate of interest might be higher.
Hence, the addition of collateral in a secured loan helps the borrower to get the loan approved quickly. To understand more about how to apply for such secured loans
