Secured Or Unsecured Loans – Which Type Of Loan Is Better?
An arrangement is a contract, usually in the form of a lease, between two parties where the party giving the loan is referred to as the lender and the person receiving the loan is called the borrower. A loan is […]
An arrangement is a contract, usually in the form of a lease, between two parties where the party giving the loan is referred to as the lender and the person receiving the loan is called the borrower. A loan is often an installment where money is lent to another party under the agreement of repayment of the loan amount plus interests. Each party agrees to loan terms before any actual money is lent. A loan can be secured by property like a home or it can be non-secure like a credit card. There are different types of loans available to suit varying needs and situations.
Home Equity Loan – This type of loan refers to a home equity loan which is calculated on the value of your home. It can also be referred to as a second mortgage. A home equity loan will calculate your principal amount at the current market value of your home after all your existing debt and expenses have been paid and includes any appreciations in the value of your home. The repayment term is determined after careful calculation of your income and your debt to income ratio.
Unsecured Loan – This type of loan does not require collateral to back up the lender’s promise to pay. This is the popular choice for most small personal loans. Borrowers looking for quick cash can apply for an unsecured loan and receive their money in a matter of hours. An unsecured loan is not collateralized and so there is no need to keep any collateral in case you fail to repay. This type of loan also has a shorter repayment term.
Gold Loan – These are secured loans. They require collateral, which can be in the form of real estate or precious metals like gold. Gold loans are not for everybody because of their relatively long repayment term and high interest rates. If you have a stable job and enough money to repay your loan then a gold loan may work for you.
Another type of loan is the Balloon Loan. This is a very risky method of borrowing. In this case, the borrower secures a balloon payment sum on a new loan that he or she signs up for. In due course, if the borrower fails to make the required monthly payments, the secured loan amount is increased to a larger amount. If the borrower is unable to make the balloon payment, then the unsecured component of the loan becomes due and the loan becomes a secured one.
There are many lending companies that specialize in offering various types of loans. One can search the Internet to find the most suitable lender according to his needs. Most online lenders offer free quotes, which enables the consumer to compare loans offered by different companies. The interest rates and terms vary from company to company, but a good lender should always be able to offer competitive interest rates. A good lender should also have a hassle-free application process that does not take much time. If you fail to repay your loan in time, the lender may refuse to offer any type of loans to you in the future.