Secured vs. unsecured loans

Financial institutions often qualify as “high risk segments” potential clients who are self-employed, have recently changed jobs or have adverse credit. If you fall into one of these categories and own a valuable asset you can apply for a secured loan. Secured or homeowner loans will require you to provide the financial institution with an asset, usually your home, regardless of whether you are paying a mortgage or you own it outright. Your property will serve as a security for the lender in the event that you are unable to pay.
These loans often offer lower Annual Percentage Rate (APR) and monthly payments than unsecured loans, and are generally easier to obtain. Secured loans are also very practical if you need a larger amount or a longer repayment period.
If you want to avoid the risks associated with secured loans and the bank regards you as “acceptable risk”, an unsecured loan which requires no security for the debt, might suit your needs. Unsecured loans are not granted for business purposes and exclude other intentions such as time-sharing financing. The repayment term will depend on the purpose of your requirement. As with secured loans, the amount borrowed is subject to the quoted APR. Lenders often state whether the rate is typical or set (offered to all applicants regardless of their risk). In some cases unsecured loan packages may offer “payment breaks” which allow you to temporarily stop your payments, although in many cases interest still accrues.
Regardless of the type of loan you decide to take, to ensure it really satisfies your financial needs, always read and understand the costs and conditions involved to avoid surprises and identify the lender that suits you best.