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Understanding Secured and Unsecured Loan

You must fully understand that borrowing money from the reliable money lender singapore can put you in a situation where your financial responsibility will be completely altered. This is because getting a personal loan or any other kind of loan will put you in a situation where you would have to make financial sacrifices just to be able to meet loan repayment terms. However, if you still feel that you really need to borrow money, then you must be able to understand the basic concept of the two most common categories that go with any type of loan that you will apply for. Whether your lender is the conventional or traditional loan institution like the bank; or an alternative lender like a payday loan instant cash lender, there are two basic things included in any type of credit loan that you should know and understand. These two basic factors are whether the loan will be secured or not secured.

 

Secured Loans

 

Loans are normally secured if the lender would require the borrower to put up collateral against the amount of money being borrowed. Secured loans involves large sum of cash. This is the main reason why lenders require some form of security for it. The collateral is usually of the same value as that of the loan amount or in some cases even higher. Secured loans allow applicants to borrow a sizable amount of money and since it is secured the interest levied on it is relatively low. Secured loans include mortgage, (any type of) vehicle and home equity loans.

 

Unsecured Loans

 

In contrast to secured loans, unsecured loans do not require collateral as security. Credit Card purchases, personal or signature loans, educational loans and home improvement loans are just some that is under the category of unsecured loans. The main disadvantage of getting unsecured loan is that the interest rate for the amount borrowed can be prohibitive. This is also the reason why, most individuals who opt to borrow money under unsecured loan would only ask only for small amount. This is to protect them from paying a very high interest on the loan.