Here is a little piece of information about alternatives to payday loans for those people who consider this type of financial help. Among regular types of loans there are secured and unsecured ones and this is the brief review of both.
- Under the term of a secured loan is understood the loan that is given against a person’s assets that are usually represented by some kind of a property such as a car or a house, or some other valuable possession.
The idea behind such lending is that in case of a borrower’s insolvency, the asset is taken away. According to the agreement a creditor gets some rights for a person’s property that can be executed in case of non-repayment. Secured loans are called so because an asset, or collateral, serves as some kind of guarantee that the loan will be repaid.
- There are several kinds of secured loans; among them are car and car overdraft loans, home loans and also loans against property. There are also secured business loans as well.
Secured loans have both pros and cons and here are the advantages.
- First of all such loans come with much lower interest rates than their unsecured counterparts. They are beneficial for people who are able to pledge something as collateral as less money will have to be rapid.
- Secured loans are also offered in larger amounts and on more flexible terms as well. It is easier for a borrower to get approval for such loans in comparison to unsecured ones as the latter refer to a more risky group of landing and therefore more requirements should be met by customers.
However, secured loans have also got some hidden traps.
- Taking out a loan is a very serious thing to do and it means that a person gets into a period when he or she is constantly in need of giving money away.
- Secured loans are risky business as there is always a chance of failing the repayment and, as a result, losing the asset.
- Besides, this option is open only to this limited group of people who actually have something to offer as collateral. Secured loans are not offered to people who have none.
When it comes to unsecured loans, they have some distinctions. They are given on the basis of a person’s credit score and income and do not require any collaterals. There are personal, business and credit card loans as well as bank overdraft loans and debt settlement loans and so on.
- The best part of such loans that a person does not risk losing his or her possessions in any way as there is no need in a collateral at all.
Besides, customers looking for smaller loans and shorter repayment periods find this lending option pretty appealing. Unsecured loans are available for a great number of people and they are often are really of assistance for a person trying to achieve his or her goal.
However, there are drawbacks as well.
- Smaller loan amount and shorter repayment period can be an advantage for some person as well as a disadvantage for another.
Besides, unsecured loans are always more expensive when it comes to interest rates. Requirements for this type of loans are also stricter and more attention is paid to credit report of a person.
Thus, these are all options for people who either have property and possessions or/and good credit report. Other less lucky people have to seek alternatives such as payday loans; especially in situations when there is no time to wait for the long approval procedure.