LOS ANGELES – December 28, 2021 – (Newswire.com)
iQuanti: With installment loans, you quickly get the funds you need to cover your expenses. With these loans, you can borrow a lump sum and repay it in fixed monthly installments. Many lenders have mild credit requirements, so you may qualify for an installment loan with poor or fair credit. Let’s dig 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 in which the borrower must deposit collateral as a guarantee for repayment. Since the provision of collateral makes the loan less risky for the lender, these loans can sometimes be easier to qualify.
A car loan is an example of a secured installment loan. When you buy a car on credit, the car itself is the security. 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 home as collateral.
What is an unsecured installment loan?
Unsecured installment loans are loans that do not require collateral. These loans are considered to be less risky for the borrower as they do not risk losing an asset if they cannot repay the loan. However, that means they can be riskier for the lender, so these loans may come with higher interest rates.
There are many lenders who offer unsecured loans to borrowers with poor or fair creditworthiness. Some of them take into account factors such as your income and career history in addition to your creditworthiness when deciding whether you will be admitted.
Unlike secured loans, if you default on an unsecured loan, you will not lose any valuable asset that you own. Keep in mind, however, that missed or late payments will be reported to the credit bureaus, which can lower your credit score and affect your chances of getting a future loan approval. Whichever loan option you choose, 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 example, if you own a car and are willing to put it on deposit as collateral, a secured loan might be better suited. Borrowers without this type of collateral or those unwilling to risk it should consider applying for an unsecured loan. Compare loan options and factors like interest rates and fees to help you decide which type of installment loan is right for you.
Note: The information in this article is provided for informational purposes only. Check with your financial advisor about your financial situation.
Secured vs. Unsecured Installment Loans