If you’re thinking about applying for a personal loan, you should first understand the difference between secured and unsecured loans. The difference could affect how likely you are to get approved for a personal loan, the interest rate you’ll get, and whether you’ll have to provide collateral to obtain the loan.
What are secured and unsecured loans?
To obtain a secured loan, you offer something you own as collateral. You agree that if you are unable to repay the loan, your lender gets to keep what you kept as collateral. In the case of a mortgage or car loan, your house or car is typically the collateral. In the case of a secured personal loan, the collateral might be money in a savings account or a fixed deposit certificate.
An unsecured personal loan doesn’t require you to put up any collateral for the loan. If you don’t repay it, the lender can’t claim collateral as compensation. However, by not paying an unsecured loan you are destroying any possibility you’ll have to apply for another loan in the future. Additionally, it is much easier to obtain a secured loan compared to an unsecured one as lenders prefer to give out secured loans.
Indiscreet loans classically have higher interest rates than secured loans. This is because lenders often view unsecured loans as much riskier compared to secured loans. Without any collateral, the lender may assume that you are less likely to repay the loan as agreed. Higher risk for your lender generally means a higher interest rate for you.
What are online loans?
Generally speaking, most online loans fall under unsecured loans. They are quick, hassle-free, and easy to obtain. Services like Cashwagon allows you to obtain a secured loan in a matter of minutes, and you don’t have to worry about keeping collateral to receive the loan. If you need money urgently, an online load may be your best option.