With time and financial responsibilities that one needs to shoulder, it is inevitable to reach a point where one requires to search up for crisis management options. Personal loan is how most people choose to ease their financial burdens. There are two broad types of personal loan: secured vs unsecured loan.
A personal loan is secured when the borrower avails the loan along from an insurance agency with an asset which backs up the loan. Once the loan is repaid in full, the asset is no longer held by the creditor. If the borrower is unable to make payments, the collateral is used to resolve it. Thus, it is vital to use a personal loan EMI calculator and plan beforehand.
There are several advantages to a loan that is secured. Since these types of loans are issued with assets as security, they are easy to avail and have lower premium rates and so are personal loan interest rates. Although the details vary from each lender, secured loans make the borrowing limits higher and offer a longer repayment term period compared to other kinds of loans.
Unsecured loans are not backed up by any assets and thus, their personal loan interest rates are high compared to the secured loans. An unsecured loan is taken by someone who has the financial resources to repay without having to use security in case of default. One usually takes unsecured loans for their student loans, credit cards etc. One must not forget to take a look at a personal loan EMI calculator before issuing a loan.
There are numerous advantages in taking an unsecured loan. They are less risky since they are not backed up by any assets, not having to worry about losing their home or car. The process of receiving an unsecured loan is very easy as there are no collaterals to evaluate. The biggest advantage of an unsecured loan is that due to lack of collateral anyone can avail for them irrespective of them owning a home or not.
Secured vs Unsecured Loan
Before choosing any loan, it is important to keep in mind that there are personal loan interest rates and check in with a personal loan EMI calculator. The personal loan interest rates vary according to agency and the type of loan that one opts for. Interest rates are expressed in percentage and are charged on the principal loan over specified terms. In a secured vs unsecured loan,
The lender who offers unsecured loans look for:
- Capital (like investment accounts and savings account)
- Character of the borrower (like employment history or credit card score)
- The borrower’s capacity (like current income and debt)
- Collateral in case they fail to pay, and lastly
- The terms and conditions of the taken loan.
While debating over secured vs unsecured loan, one always needs to check his priorities and requirements and use a personal loan EMI calculator to know the EMI amount