Title:
Unsecured Loan
Word Count:
433
Summary:
When you take out a loan, you will many decisions to make, but one of the most fundamental, will be
whether or not to opt for a secured or an unsecured loan.
Keywords:
Unsecured loans, loans, debt, repayments, interest rates, borrowing, APR, finance, money
Article Body:
When you take out a loan, you will many decisions to make, but one of the most fundamental, will be
whether or not to opt for a secured or an unsecured loan.
A secured loan will have a number of advantages. First of all they are easier to get an approval for. This is
because lenders will know that their money is at less risk due to the security offered. There is also the
benefit of getting better rates and more favourable terms. It is a known fact that the terms will be less
onerous if you offer some security. Your annual percentage rates, which are basically the cost of the loan,
will also be lower. This can have a major effect on the amount each monthly repayment will be. It may also
mean you can pay the loan off faster. The final major advantage of getting a secured loan is that you will
probably be able to borrow more than if it was unsecured. This is because banks will be willing to lend you
more, but just as importantly, because the rate is lower, you will be able to afford more.
There is a major disadvantage to all secured borrowing however. The lender will be able to take title to your
assets, usually your home if you fail to keep up with repayments. This is a huge risk that many borrowers
simply are not willing or able to make. Suppose you want to start a business but it is not guaranteed to be
successful. If you have a family with young children it would be a very bad idea indeed to secure the lending
for this business over your home.
What would be far safer for you and your family would be to get an unsecured loan. While unsecured loans
may be harder to get approval for, they are still generally available for anyone with a regular income and
good credit history. The terms may be slightly less favourable than if you were going for a secured loan, and
the rate may be higher. This will mean you will have to make higher repayments or over a longer period.
But the major advantage is that your house is not at the same risk. This will allow you to try business
ventures or take other risks with the money you borrow.
One thing to always remember is that even if the loan is unsecured, you are still liable for the full
amount and if you are made bankrupt, all your assets, including your house can be used to satisfy your
creditors.
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