When you want a personal loan, you must understand its types, features, eligibility criteria, and many other aspects. Only then will you be able to make the most out of the credit and ensure it is put to proper use. Usually, a personal loan is of two major types- secured and unsecured. Most people know what an unsecured or regular personal loan is.
However, most people need to gain knowledge about secured loans; even if some have, the knowledge is limited. Under such conditions, taking the loan can put you in jeopardy. Therefore, we have described some fundamental facts about a secured Instant personal loan that you should know.
What is a secured personal loan, and how is it different from an unsecured loan?
The first and foremost thing you should know about the secured personal loan is what exactly it is. From the name itself, you can understand that this particular credit type will be secured, and you have to provide collateral as the security.
For instance, the property will act as collateral if you are taking a personal loan for your house renovation work. Similarly, when you choose a secured loan with a low principal, you can keep your savings assets as collateral.
If you cannot pay the loan in the future, the creditor will be liable to use the collateral deposit and extract the amount as the debt. In other words, the collateral will get forfeited, and you won’t have any right to it anymore.
This is the basic difference secured loans have when compared to unsecured credits because, in the latter one, you won’t have to give anything as collateral. Also, the collateral’s value should be enough to use as the wager to get the principal amount you need for the loan.
What are the benefits of taking a secured personal loan?
- Usually, the personal loan interest rates for secured credits are lower than that of unsecured loans. Therefore, you can reduce the overall payments you have to make monthly to the creditor to repay the credit.
- Since you are already giving something as collateral that the creditor can use to get back the debt amount, securing loans’ processing time is quite short. Often, it is granted within a week or two, which is one of the major benefits of using a secured loan.
- Also, if you don’t have a higher credit score, it would be better to go with the secured loan because, most often, creditors need to pay attention to the credit score. Similarly, if you have a poor credit history, this loan will help you to meet financial emergencies.
- If you want flexibility in choosing the principal amount or negotiating the repayment terms, go for the secured credit.
Is there any drawback to opting for a secured personal loan?
- The major drawback of opting for an unsecured personal loan is that if you cannot pay back the amount, the collateral will get forfeited, and you won’t exercise any control over it.
- You can only raise the value of the principal amount if you provide collateral with the equivalent valuation. For instance, if you want a loan of INR 10,00,000, you need to give collateral with the same valuation.
- Another major drawback of opting for a secured personal loan is that you have to wait until legal verification is done for the collateral. The processing time can extend if there is any problem with the property or any other item you give as collateral.
As you now know that secured credit comes with lower personal loan interest rates and flexible repayment terms, so you won’t have any problem deciding whether you want to go with it. However, keep the drawbacks in mind so that you won’t have to regret it later if you fail to pay the debt amount.