Secured Loan Rates

The loans granted by banks and financial institutions are generally classified into two types-secured loans and unsecured loans. It is often seen that the secured business loan rates are more attractive than the unsecured rates for business. There are many factors which make the secured loans more attractive for consumers than the unsecured loans. The comparison between secured loans vs unsecured loans will help us understand these facts well. So, before we acquaint ourselves with various rates for secured loans, let us first understand this difference in the next paragraph.

Difference Between Secured and Unsecured Loans

Secured loans, are those loans which come with a collateral. This means that the lender or the bank which gives money has the right to acquire the collateral placed by the borrower if he is not able to repay his loan on time. Secured loans are readily granted by banks and financial institutions because there is no danger of the bank money getting wasted due to defaults from customers. Many times, home loans and car loans are secured loans and banks have the home or the car as the collateral. Since the banks have assurance that their money is safe, they can afford to give the customers a relief in the interest rates. This is why the secured car loan rates are quite lower as compared to the unsecured ones.

Unsecured loans come with a steep interest rate most of the time. The best example of this is the personal loans. The annual percentage rate becomes as high as eighteen percent at times since there is no collateral with the bank. Personal loan rates are even higher in times of a situation like economic recession or credit crunch. The bet part of the secured loans is that they can be immediately received from banks, if your income is good and consistent and the value of your asset to be placed as collateral is large enough as compared to the total loan you wish to take. As against this, you will need longer time for getting the high interest unsecured loans. The application process is simple and easy in case of secured loans and the term of the loan and rate is fixed.

Rates for Secured Loans

The loan rates depend on the policies and rules and regulations of the lenders. These rates can be different for different banks and lenders. On an average, you can expect them to be anything between two to five percent less than the loan rates for unsecured loans. It also depends on the total period for which the loan is being taken. If the period is reduced by the borrower, then the rate will automatically go up and vice versa. The credit score and past credit history of the person is also taken into consideration while granting the secured loans. If you have repaid all previous loans, on time, you will be having a good credit score and the chances of getting attractive rates are very high. Secured loans for people with bad credit are hard to get, buy not totally impossible.

This information will hopefully help you at the time of taking loans for personal purposes. So, indulge in proper financial planning for a secure future. Good luck!