Major Differences Between Secured and Unsecured Loans?

 

When you are looking to borrow money, you will have to decide between a secured loan or unsecured loan. If you are wondering what is the difference between the two, read on.

What is a secured loan?

A secured loan is one that is secured by some form of collateral. Secured loans require you to put up something of value as collateral in the event you are unable to repay your loan, whilst unsecured loans allow you to borrow the money without putting up any property (after the lender considers your financials).

A collateral is something of value, such as a car, a house, or stock. If you don't pay back the loan on time, the lender has the authority to seize the collateral. A car loan and a mortgage loan are two common instances of secured loans. Bajaj Finserv also offers house loans, loan against gold jewellery, and loan against assets, so you can apply for a secured gold loan online.

Even if the collateralized property is repossessed by the lender, you may still owe money to them. The lender would sell the house and use the proceeds to pay off the loan. Now, if the property's market value is less than the outstanding loan balance, you'll have to pay the difference out of pocket.

What is the meaning of an unsecured loan?

An unsecured loan is one that is not secured by anything. If you default on a loan, the lender cannot take control of your property to collect the debt. This sort of loan includes credit cards, student loans, and modest unsecured personal loans, to name a few. Personal loans are also frequently available without the need for collateral. To acquire an unsecured loan, you usually need a steady income and a good credit history.

As a result, both secured and unsecured loans have advantages and disadvantages, and you can choose based on your specific position and requirements. On the other hand, if you have a short-term financial need (less than a week) and want to expedite the process, an unsecured loan is the better option.

 

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