Difference Between Secured and Unsecured Loans

Posted by admin

September 26, 2011

The Debt & Loan Info Centre endeavours to give seekers clear and concise information about loans and debts as possible. One of the many queries people have had in the recent past is that of wanting to know the difference between secured and unsecured loans.

The easy answer is that one requires security and the other doesn’t. As you know, whenever you approach a financial institution for a loan, they will require you to give them something against which they will lend you money. This is so that in the event that you are unable to repay the full amount, they will sell the item to recover their money. In most cases, the item in question is landed property. This in essence means that only homeowners or those who own land can access secured loans.

Unsecured loans, on the other hand are accessible to those with no land or homes. The borrower however, needs to show that he is able to sustain the monthly instalments that will be required to repay the loan, plus its interest. This in most cases means presenting the lender with payslips to show that you earn a regular income. Another requirement, again based on the lack of security, is a good credit rating. Those with bad credit history will be unlikely to obtain unsecured loans particularly from high-street banks.

Another difference is in the length of time allowed for repayment. Generally, secured loans can be for long periods of time, often up to 25 years. This is not the case with unsecured loans and this is again down to the security provided by the borrower. Lenders will also feel comfortable lending bigger sums to those who provide security than to those who don’t. For more information, you can visit the Debt & Loan Info Centre.

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