Going for a loan? Find out when and why you should opt for a secured loan instead of an unsecured loan.
The greatest merit an unsecured loan seem to have is that there is no requirement of a collateral to obtain the loan. The credit amount is extended based on the credit history, personal/financial circumstance and other such factors. But apart from this what are the aspects you should be familiar with before opting for an unsecured loan? Well, a higher rate of interest is a good point to start with. The apparent merit of an unsecured loan over a secured loan might need probe beyond the surface.
There can be several factors deterring you from acquiring an unsecured loan apart from the most obvious-the skyrocketing interest rate. Unsecured loans are generally extended for a smaller amount and for a smaller duration of time. If you want a large amount with installments spread over years or even a decade then you would preferably fall for a secured loan. The short term benefit will be instant and easy approval and in the long term interest rate on the loan amount acquires a more concrete importance.
Bad credit history, default in payment and and unpredictable debt repayment pattern may also trigger the choice for a secured loan. If you are a homeowner and want to go for a , chances of getting a loan are much much higher for you since there is a collateral to secure the payment against.
Loans are governed by the Consumer Credit Act 1974. You may opt for insurance to cover for your loan in case of sickness, accident or any other mishap. These may turn out to be a tad expensive though.
