Secured vs. Unsecured Installment Loans
LOS ANGELES, December 28, 2021 (Newswire.com) - iQuanti: Installment loans can get you the funds you need fast to cover expenses. With these loans, you can borrow a lump sum of money and pay it back in fixed monthly installments. Many lenders have lenient credit score requirements, so you may qualify for an installment loan with poor or fair credit. Let's dive deeper into the differences between secured and unsecured installment loans so you can figure out which option is right for your needs.
What is a secured installment loan?
A secured installment loan is a loan that requires the borrower to put up collateral as a guarantee of repayment. Since providing collateral makes the loan less risky to the lender, these loans can sometimes be easier to qualify for.
An auto loan is an example of a secured installment loan. When you buy a car "on credit," the car itself is the collateral. If you fail to make your payments, the lender can repossess your car. A mortgage loan is another type of secured installment loan that uses your house as collateral.
What is an unsecured installment loan?
Unsecured installment loans are loans that don't require collateral. These loans are considered less risky for the borrower, since they won't risk losing an asset if they can't repay the loan. But that means they can be riskier to the lender, so these loans may come with higher interest rates.
There are many lenders that offer unsecured loans to borrowers with poor or fair credit. Some of them will consider factors in addition to your credit score when deciding whether to approve you, like your income and employment history.
Unlike secured loans, you won't lose an item of value you own if you default on an unsecured loan. But keep in mind that missed or late payments will be reported to the credit bureaus, which can lower your credit score and hurt your chances of being approved for credit in the future. Whichever loan option you choose, making consistent on-time payments can have a positive impact on your credit score.
Which loan is right for you?
When deciding whether to get an unsecured or secured installment loan, consider your options and individual needs. For instance, if you own a car and are willing to put it up for collateral, a secured loan might be a better fit. Borrowers without that type of collateral, or those not willing to risk it, may want to consider applying for an unsecured loan. Compare loan options and factors like interest and fees to decide what type of installment loan is right for you.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: iQuanti, Inc.