Individuals who are in the market for a personal loan will have to make an important decision, and that is to decide between an unsecured and a secured personal loan. These are the two main types of loans that are available to all borrowers and the basic difference between them is in the name. Before you make a final decision, you should take your time and weigh the advantages and disadvantages of both, in order to make an educated decision, one that you will benefit from in the long run.


It goes without saying that money is a necessity for all of us and that we all need money in order to satisfy our daily needs. Therefore, anyone in need of money may resort to banks or other lenders in order to obtain a personal loan that caters to their immediate financial needs or something which is beyond their financial possibilities for the time being. It comes as no surprise that under such circumstances, individuals turn to lenders to solve their financial problem. Although there are numerous types of loans to choose they will come under the heading of an unsecured and a secured personal loan.


We should start by saying that a secured personal loan is provided by a creditor against an asset that is pledged by the borrower as collateral to the loan. This collateral acts as a security for the loan amount or debt paid to the borrower and it is considered a secured debt. In case the borrower doesn’t repay the loan amount as agreed in the contract, the lender is entitled to take possession of the collateral and sell it off to regain the whole loan amount, or the amount that is outstanding against the loan.


An unsecured personal loan is the other choice you can make when applying for a loan. In other words, you can opt for an unsecured loan, which means that the lender will not demand collateral in return for the loan amount that he gives you. In general terms this type of unsecured personal loan is based on the assumption that the amount borrowed will be repaid by the borrower without default. In the event of a deviation from it, the creditor has no collateral that enables him to recover his loss.


Taking into consideration the terms and conditions of each of these loans, it is normal for the secured personal loan to have smaller interest rates and more favourable terms as from the perspective of the borrower. However, in order to obtain an unsecured personal loan, you should have an excellent relationship with your lender accompanied by an excellent credit rating. It goes without saying that lenders prefer secured loans as they have the possibility to recover their loss in the case of non-payment of the loan.


A secured personal loan is an excellent choice for individuals who have good credit and are interested in obtaining a loan with smaller interest rates and that can be repaid over a longer time period.


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