The Reasons Secured Loan Offers a Good Alternative to Borrowers

Posted by SharonEvans on February 22nd, 2013

A secured loan offers some interesting advantages and disadvantages to a lender, concerned about a refused loan. Generally, loans are not approved by banks or other private lending institutions when the prospective borrower fails to show proof of a steady monthly income source. Similarly, individuals with poor credit scores or high levels of existing debt do not get loans from banks and even if they do, at rates that are exceedingly high. This is the reason secured loans are turning out to be a good alternative to such borrowers with low credit scores. These loans offer a win-win situation to borrowers and lenders providing a middle ground and eliminating the risk of forfeiture.

A secured loan is preferable for borrowers in the low income and high debt category as they are approved quicker than an unsecured loan. The process is expedited by the buffer offered by the loan security which is usually an asset of some value. Borrowers who need urgent financial assistance can avoid the frustration of a refused loan by approaching a lender with collateral asset of comparable value. This gives confidence to the lender that the money being lent out is safe even in the scenario where the borrower fails to repay the sum. At a point, when the total accumulated debt including the interests rises over the value of the collateral, the lender can take control of the asset and try to recover the debt by auctioning it off.

The worst case scenario in case of a secured loan isn’t really a pleasant option. However, it gives a chance to the borrower with unsteady monthly income, to get a quick loan during an emergency need, whether it is for business or for personal expenses. Similarly, it is a good option for borrowers who are confident about their income sources and the future prospects if they can find funds at the right time for the initial investment. A refused loan doesn’t leave borrowers with many options. If funds are required in short time for a small duration, a borrower can always secure assets like property or jewellery and get the funds required. For unsecured loans, the approval takes much longer, given that the lender has to perform several background checks including the borrowers’ repaying ability. All this may take undue time.

There are two important benefits offered by a secured loan. Firstly, the chances of a refused loan go down drastically as you can always be assured of a sum based on the asset you pledge. Secondly, you can borrow a greater sum of money for a longer time period for your business or personal needs. As long as you can repay the debt and accrued interests on time, there is no reason why secured loans should be avoided especially if no bank is interested in lending loans without security. Secured loans are also a good way of improving your credit scores especially when you are confident of making the monthly interest payments on time.

Are you dejected with the refused loan applications? Please visit our website to avail a secured loan against a car today.