Tag Archives: Secured Loans

Secured loans for beginners

Secured loans are not for the faint of heart nor for the financially undisciplined. It is the kind of loan that needs you to make a commitment and once done there is no looking back. You’re locked into it until the loan is repaid in full (interest charges and fees included) and it is not the kind of loan that you should take if you are heavily into debt because a secured debt needs collateral of some kind, and that could be one of very many things. It could be your home, or it could be your car, some of your stocks or bonds or just about anything else of value to the lender.

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Let us assume that you have put up your house as collateral. The grim reality of the situation is that unless and until you make your payments on time you will be forced to give up your home and move out since the lender has every right to forcibly take your home and sell it since you haven’t repaid your debt. The secured bit means that the lender has managed to get himself security of mind while you end up feeling a bit insecure until such time as you clear the debt. If there are any problems, your home can be repossessed and you will be in a mess without much of a hope of getting out of it.

Normally, when one talks about personal loans that are given out either by a bank or a building society we are talking about loans that are unsecured and there is nothing to say that a lender can seize your home if they so want to because those loans by their very nature are unsecured. It is hard to see why someone would want a secured loan over an unsecured loan, but the reasons for that too does exist and secured loans are not without their own merits. For one, the fact that a secured loan is, well, secured means that it makes it much easier to sanction by a bank that has peace of mind. That holds true even if the bank is lending to someone with a poor credit score since the bank holds all the aces.

Secured loans For BeginnersAnother thing is that large sums of money are more readily sanctioned by banks when it comes to secured loans since banks have that sense of security about things. It’s why they will happily sanction loan amounts they would never even consider for an unsecured loan. Moreover, these loans are repaid over a longer time, so banks again readily dispense with these funds since it accumulates more interest even if the monthly repayments don’t amount to a hug amount. All said and done, secured loans are not the best option for someone with debt and the only good reason to use them is to cut debt costs. Using it to fund a new purchase is just folly and such thoughts should not be entertained.

All else being equal, do not turn to a secured loan. An unsecured loan is always the more preferable option in any given set of circumstances.