Difference Between Secured Loans and Unsecured Loans
Secured and unsecured loans can easily be differentiated from their names itself. Secured loans are approved against some security while unsecured loans are approved on the basis of the credit worthiness of the person and his ability to pay the loan amount.
Here are some of the main differences between these two types of loans to make you understand them in a better way.
- Secured loans are issued against security or guarantee like your car, house, investment documents etc. while unsecured loans are issued against your credit worthiness and your credit scores.
- Secured loans can be issued for a longer tenure and have lower rates of interest while the rate of interest in case of unsecured loans depends on the credit ratings and the duration for which the loan is issued which again may vary according to the amount of loan.
- In case of secured loans the repayment options are more flexible while in case of unsecured loans banks have the upper hand in deciding about the repayment options.
- Secured loans are given on the basis of your assets while unsecured loans are given on the basis of trust and faith.
You must know that you need not hand over your assets to the lending company while taking the secured loan but the lending company gets the rights to seize them in case of failure to repay the loan.