In the ever growing options for loans, there is one thing you should familiarise yourself with, and that is, the difference between a secured loan and an unsecured loan.
A secured loan is a loan backed by security of some kind, such as your home or car. Lenders are more willing to offer a loan if there is an asset backing the loan agreement. In the unfortunate event that you are unable to repay the loan, the lending company can take possession of the asset in order to satisfy the outstanding loan amount.
Secured loans sometimes have a lower interest rate charge on the loan, but are primarily taken out by people who have a low credit rating, whereby an unsecured loan is not available to them.
An unsecured loan is more preferable as should you get into difficulty repaying the loan, the lending company cannot take possession of your assets, but they can still take you to court, adding additional charges and damaging your credit score.
To qualify for any type of unsecured loan, you will need a good credit rating.
Which Loan for You?
An unsecured loan is usually more preferable, but if you don’t have a great credit score, then you may have no choice but to obtain a secured loan, but always remember to do your due diligence and shop around, sometimes the best interest rate is not the best loan.