Unsecured Loans vs. Secured Loans
It is not uncommon to find yourself in the situation where you need
extra cash. Sometimes unexpected things just happen! When people find
themselves in an unexpected situation their first thought is usually to
take out a loan.
The most common loan options are secured and unsecured. Both types help out with finances for a temporary amount of time.
Unsecured Loans
Unsecured loans differ from secured loans because they are given
based on credit reports, income, and other similar factors. However,
they are known for having higher interest rates and strict repayment
terms. If you do not pay this loan back on time it is going to reflect
negatively on your credit report. There are a few different types of
unsecured loans that are mentioned below:
Credit Cards
Credit card companies trust their customers to pay the money back but
do charge interest. Your credit rating will be lowered if you do not
make the payments on time.
Personal Loans
Personal loans are given out to people who have solid credit scores.
They are also known for having extremely high interest rates.
Payday Loans
Payday loans are given to give you an advance on your paycheck. On
your payday you are responsible for paying back the loan as well as any
interest that has accumulated. Payday loans are only recommended for
emergency situations.
Secured Loans
Secured loans are taken out when you have an asset available to be
used for collateral. The loan amount varies based on the value of the
item that is being used for collateral. It is important to pay back your
loan because if you do not the lender will become the owner of the
item. Several types of secured loans are listed below:
Mortgages
Mortgages take place when people are purchasing real estate. Banks
automatically use the property as collateral and pay for the entire cost
up front while the individual is responsible for making payments until
they have fully paid the loan amount and interest back to the bank.
Car Loans
Car loans work the same way as mortgages you are just purchasing a different item.
Pawn Loans
Pawn loans simply use various items such as jewellery and luxury
watches for collateral. When you choose to take this route you do not
have to worry about it affecting your credit report. If you are looking
for a pawn loan you may want to consider
Pawnbank.