SECURED AND UNSECURED LOANS?

How arethese loans talk about from each other?

{ 2 comments }

UNITool February 19, 2014 at 1:25 pm

A secured loan is tied to some sort of collateral that the lender can take possession of and sell in order to recoup their money in the event the borrower defaults. Examples of this would be a mortgage on a house, a car loan, or a pawn loan. An unsecured loan has no such tie to property. In the event of default the lender can pursue legal action against the borrower to recoup their money but it is a lot harder. Therefore there is a lot more risk for the lender in an unsecured loan, so interest rates will be significantly higher. Examples of unsecured loans would be credit cards, student loans, or personal lines of credit.

S February 19, 2014 at 1:46 pm

The secured loan has collateral the lender can repossess if the loan is not repaid. Such as a home or car loan. Unsecured loans have no collateral, thus are more expensive to compensate for the added risk to the lender.

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