The high cost of living has made it impossible for many to survive without borrowing. If you need some quick cash, there are different ways in which you can acquire finances for a specific need. Loans are divided into two categories, namely secured and unsecured. A secured loan is one that is tied to a particular asset which acts as collateral. The asset could be a home, property equipment, or even a car. Lenders of secured loans consider borrowers high risk, so they attach the loan to one of your valuable assets which can be liquidated or sold if you don’t make payments.
Though secured loans are not the best, they allow you to borrow a substantial amount at a reasonable interest rate. They differ from unsecured loans in that this category does not need any form of collateral. If your credit rating is not good, qualifying for an unsecured loan is hard, but you can easily acquire a secured one. Secured loans are popular among borrowers since they are easy to obtain, and most come with favorable terms and conditions.
The different types of secured loans include mortgage, title loans on cars, pawnbroker loans, and CD and savings loans. If you want to purchase a home, you may not have the full amount to buy it. Applying for a mortgage can make it easy for you to buy the house. A mortgage loan is a form of secured loan in which the property in question acts as collateral. If you don’t make payments on the mortgage, the lender can foreclose the property. Since a mortgage for your home is a large purchase, you may have to make repayments for almost 15 years. You can reduce the interest rates for the mortgage by providing a down payment of at least 20% the price of the home.
You can also apply for a secured loan where you pledge your vehicle as collateral. A title loan is a short term loan that comes with high-interest rates. If you choose this type of loan, your car should have full coverage insurance for you to qualify for it. Also, the lender has to evaluate for any mechanical defects when determining its value. Though you don’t need good credit to acquire this loan, you have to prove your ability to make repayments while applying for the loan.
If you have a valuable item such as musical instruments or jewelry, you can use them to secure a pawnbroker loan. The amount that you can borrow in this case depends on the value of the asset in question. The pawnbroker dictates the time frame for you to make repayments for your loan plus the interest.
Secured loans are more available compared to unsecured ones. They also give you a chance to build your credit score and allow you to borrow a significant amount. You should, however, be disciplined in paying off these loans to avoid losing an asset.