The Benefits Of A Secured Loan

The Benefits Of A Secured Loan

by

Steven K Bailey

There are a number of advantages to taking out a secured personal loan as opposed to unsecured loans. Firstly, if you are a home owner and have the ability to financial providers, such as banks and other institutions, then you will have a greater chance of getting your loan approved. Lenders are always very worried about risk, and the biggest risk from their point of view, is that you will be unable to pay back the loan. Therefore, if you have provided them with some form of security, then they will be far more willing to lend to you the money you need. Before considering lets have a look at the advantages of taking out a secured personal loan.

Lower Interest Rates

The interest rate on a secured loan is definitely lower than that on an unsecured loan, and if an individual takes out a loan with a fixed rate you always know how much you will be paying every month. A variable interest rate loan means that your payment could go up and down as the rates move. That could make it more difficult to pay if the interest rate is higher than you expected.

Credit History Advantages

While many lenders will check a borrower\’s credit score and history for a personal secured loan, a few late payments or other difficulties aren\’t nearly as worrisome. As long as there is no question about the value of the collateral, many lenders will not enforce restrictive rules regarding the lowest credit score that can qualify for personal secured loans. Now, if a borrower has a history of collection accounts and a bankruptcy or foreclosure, a lender may want to pass for fear that there may be some hidden issue regarding the true value of the collateral.

Low Risk

Because a secured loan carries far less risk for the lender, they will be willing to offer you far more attractive terms and conditions regarding the loan. So even though you are borrowing far more money, and require a much longer time for paying it back, you will have lower interest rates, less severe penalty charges and generally speaking, a more generous loan agreement.

Secured loans are a great way for building credit or for erasing a bad credit history. All the same customers should avoid defaulting on payments as this attracts heavy penalties and may push you deeper into a debt trap. Because you have a secured loan does not mean you can be complacent, on the contrary you should be extra careful and wise as this is a good way to set you on your way to financial stability. If you successfully pay off your secured loan, you save your asset as well as complete the task for which you took the secured loan. This is a win-win situation for you, as you will be looked upon as a valuable and reliable customer and any future loan requirements will be met without any hassles.

Copyright (c) 2013 Steven K Bailey

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