What is a Secured Loan?
Secured loans – also known as homeowner loans, home loans or second-charge mortgages – allow you to borrow money while using your home as ‘security’ (also called ‘collateral’). This means the lender can sell your property if you aren’t keeping up with repayments, as a way of getting their money back. What is an Unsecured Loan? What is an Unsecured Loan? An unsecured loan is a loan that doesn't require any type of collateral. Instead of relying on a borrower's assets as security, lenders approve unsecured loans based on a borrower’s creditworthiness. Examples of unsecured loans include personal loans, student loans, and credit cards. Differences between Secured & Unsecured Loan? In short the main difference between a secured loan and unsecured loans is the loanee requires a tangible asset which they can sell if you default on the loan. There are advantage and disadvantages to both types of loan as an unsecured loan naturally requires a much better credit score which may not be available to the whole population however if your finances do take a turn for the worse the loanee cannot repossess your property or car to pay of the loan.
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