Secured and Unsecured Loans: Generally two types of loans are issued in the banking system. First, secured loan and second unsecured loan. Before applying for a loan, it is important to know what kind of loan you are taking and what are its pros and cons.
Secured and Unsecured Loans: The festive season is about to start in the next few weeks. There are many types of plans for spending, investing or financial products on festivals. It is generally seen that people also have to take loans for the festive expenses. A loan is such a liability, about which it is said that it is better not to take it, or at least as much as it should be. Generally, two types of loans are issued in the banking system. First, secured loan and second unsecured loan. Before applying for a loan, it is important to know what kind of loan you are taking and what are its pros and cons.
Secured loan
Secured loan means secured loan. In secured loan, the bank gives a loan by mortgaging (mortgaging) a property. In a secured loan, the customer always has to give any guarantee or asset to the bank. For example, if you have taken a home loan to buy a house, the bank will have the right over the house papers until you repay the entire home loan.
In the secured, both physical and financial assets can be used for collateral or security. Physical assets include assets like gold, houses, cars. At the same time, financial assets include equity shares, FDs, mutual funds, life insurance policies. Secured Loan Since your property is given against the property, it makes the money of the bank safe. The bank is sure that if you do not give the money, then it will recover by selling your property. Hence the interest rate is lower in it. Its disadvantage is that if you do not make the loan repayment, the bank recovers your money by selling your assets.
Unsecured Loan
Unsecured loan means unsecured loan. When a loan is given without any guarantee, it is an unsecured loan. There is no guarantee or collateral from the customer in this loan. Banks offer unsecured loans based on the credit history and credit score of the customer. In this, the bank looks at the facts like the customer's past repayment history, income source, six months salary slip or income tax return and approves the loan on this basis. Unsecured loans have higher interest rates than secured loans and have a shorter repayment tenure.
Personal loans, education loans, instant loans, credit card loans and business loans fall under the category of unsecured loans. In unsecured loans, the bank does not take any guarantee from the customer. In this, if the customer does not know how to repay the loan, the bank suffers a loss in it. Such cases often go to court. However, non-repayment of unsecured loan spoils the CIBIL score of the customer. Due to which you will find it very difficult to get the loan in future.
Understand the difference between secoed and unsecured loans
The interest rates of secured loans are generally low. Whereas, for unsecured loans, the customer has to pay more interest.
It takes more time to get a secured loan sanctioned as banks do valuation of the assets to be pledged. At the same time, unsecured loans get approved very quickly.
Secured loan is available even on low credit score. Whereas, for unsecured loans, the CIBIL score should be strong.
The amount in a secured loan usually depends on the value of the collateral property. Whereas, in unsecured loans, the amount is decided on the income and repayment capacity of the customer.
Secured loans are given for a longer tenure, whereas unsecured loans have a shorter tenure.
(Note: This information has been taken from the blogs of the official website of the banks.)
No comments:
Post a Comment