So you have found yourself in a situation where you need to take out a long term loan, but you have no idea where to start. With so many options out there it might all get confusing at times. This article is here to clear up the difference between secured and unsecured loans and will help point you in the direction of which one is the correct one for you.
What is a secured loan?
A secure loan is a loan where the borrower promises any one of their assets as collateral for the loan, this then becomes a secured debt which is owed to the creditor who approves the loan. This means that if the borrower where to miss a payment or to stop paying off the loan, then the creditor would have the right to take that asset as a form of payment. Once they have taken ownership of the asset it is theirs to do what they wish with it, they can sell it if they want to in order to gain some of the money that they are owed, back. The most common example of this is a mortgage, in which the house is the asset. Should the borrower fall behind or fail to make payments, then the house will be taken back by the creditor.
What is an unsecured loan?
An unsecured loan is used in reference to any type of debt or general obligation …Read More