Unsecured vs. Secured Debts: Which Is Best For You?
Were you looking to cover many of your quick monetary needs and confused between the secured loan vs unsecured loan?
If yes, then you can go ahead and read this post and know more about secured loans vs unsecured loans!
What are secured loans?
Secured loans are those for which you need to put down collateral. It can be an article of monetary value that the holder holds the rights till the time the loan gets repaid. Properties, gold, and other tangible assets are considered collateral. If you don’t repay the loan amount on time, then the lender can liquidate the asset. When you apply for a secured loan, then you can avail lower interest rates and processing fees.
What is meant by unsecured loans?
An unsecured loan is something that you don’t need to keep any collateral. Any type of unsecured loan is given on the basis of your creditworthiness. If you have a credit score of 750+, stable employment, and a repayment history, then you can get the loan approval. Thus, you should always keep a check on your credit report. Unsecured debts come with a higher rate of interest. It is because lenders run the risk of losing the repaid money. It is because there is no collateral involved. The best example of an unsecured loan is the instant personal loan.
Secured loan vs unsecured loan – Which one to choose?
When it comes to secured loans vs unsecured loans, you are bound to get confused about which one to choose.
Here’s how you can choose and decide which type of unsecured loan or secured loan is best for you:
Collateral
Collateral is one of the key components that help you get a secured loan. You can also pledge your property and get a large loan amount. It is also possible to pledge some FDs and securities to get secured loans. It means that you can get the loan at a lower rate and enjoy paying reduced EMIs. On the other hand, if you go for the unsecured loan, then it means that you need to manage to pay a higher rate + increased EMIs.
The loan amount
Secured loans come with a higher loan amount than an unsecured one. For instance, the loan against property can let you avail an amount in crores. On the other hand, unsecured loans like instant personal loans may let you avail only up to Rs.25 lakh.
The loan tenure
The loan tenure of the secured loan is longer. On the other hand, the loan tenure of the unsecured loan is not that higher than secured loans. Personal loan tenure gives you the time to repay the amount over 5 years. Secured loans like the loan against property come with a tenure of 2-20 years.
The rate of interest
You can enjoy low interest personal loan for applying for an unsecured loan if you have a robust civil score and a stable employment history. For secured loans, the rate of interest is lower as there is collateral involved. By making prepayments, you can reduce your outstanding amount + interest. It means that you can manage to pay reduced EMIs.
You just went through the basics aspects of secured loans vs unsecured loans. Based on your needs and other aspects, you can decide which one to go for.
For best loan offers, you can land on the third-party website and pick a deal that suits your repayment capacity and requirements.
