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Advantages and disadvantages of an unsecured loan
Unsecured loans are loans where you dont need to put up any of your assets as collateral for the loan. For this reason, an unsecured loan might seem ideal since it is perceived to be less risky. However, there are other issues that should be taken into consideration, below is an outline of the advantages and disadvantages of an unsecured loan:
Advantages
Available to both tenants and homeowner
The biggest advantage of unsecured loans is the fact that they make it possible for anyone to borrow money; whether youre a tenant or a homeowner, you can borrow money without putting up any collateral.
No risk to your home
For those who own a home but would rather not risk it, an unsecured loan is the solution since it doesnt directly pose a risk to it or your other assets.
Quick completion
Because theres no title or any other collateral to evaluate, and because unsecured loans are usually in small amounts, loan completion is much quicker than on secured loans, in some cases you can receive the money on the same day of being approved.
Disadvantages
High interest rates
Because unsecured loans are backed only by trust, theyre more of a risk for the lender, the higher the risk the higher it costs to borrow; borrowers with bad credit will face high interest rates on an unsecured bad credit loan, if you have a good credit rating however, this will not be so much a problem for you.
Limited loan amounts
If you need to borrow a substantial sum of money, an unsecured loan is not the solution for you; unsecured loans are given in small amount, usually you can only borrow up to £25000.
Lack of flexibility
When you take out an unsecured loan you agree to pay it back in instalments over a given period of time for example £300 per month for 5years, you will not be able to adjust to a lower payment, also if you wish to pay off the loan sooner, you will face an early repayment fine.
As you can see, an unsecured loan has its pros and cons, ideally if own a home or other property that you can use as collateral, it is better to get a secured loan as the interest rate will be significantly lower. If you have a good credit rating and need a small loan, an unsecured loan is ideal for you.
The A to Z of Homeowner loans
Not all of us are financially stable at all times and with the growing needs in the mind, we do need financial help. This financial help (loan) may be in the form of borrowings from our friends or even from the financial institutions.
It is always better to go for a secured loan than an unsecured loan, if your financial strength allows that. The reason: A secured loan comes with a lower interest rate than an unsecured loan and this eventually means low financial burden on your shoulders. This also means that you are left with enough money to meet your other financial needs and no further requirement of loans in the near future.
Getting a secured loan is also much easier than an unsecured loan as the lender (financial institution) has some security in exchange for the loan amount. The pledged security is seen by the lender as an effective guarantee for the loan amount. The security may be in the form of home mortgage, property mortgage or vehicle mortgage.
A secured loan can be obtained by the owner of a home while a tenant can only get an unsecured loan.
If you are planning to spend a huge amount of money on building, renovation or any other expenses for your home you can go for a Homeowner loan. A homeowner loan is a loan which is given by a lender to the borrower against a security (home). Anyone who desires of getting a homeowner loan must have the complete and undisputed ownership of the home (security). The lenders in the present day loan market scenario offer loans which are corresponding to the home equity. By home equity we mean the price which the home will fetch if it is sold in the marketplace.
Now let us have a look at some of the benefits of the homeowner loans. These types of loans carry a low interest rate and come with easy repayment terms. The loan period may also be favourable for the borrower and can be of any period between 3-25 years. You can take these loans for almost anything from home renovation to buying a car or from holiday debt consolidation to getting a second home.
These secured homeowner loans provide an effective platform to individuals for buying a new property or meeting any other financial requirements. However, an individual opting for the same must be clear in his vision and must analyse his financial strengths and requirements before signing on the dotted line. It is highly recommended that one must always compare secured loans to have a complete and clear insight about them. This will also help to get a low interest and budget-friendly loan. You can easily get the required information from the Internet and in case you require some advice you must not hesitate to seek the services of a professional expert or a financial analyst.