Secured Loan ? A Timely Alternative for a Refused Loan

Posted by SharonEvans on February 22nd, 2013

Are you looking for a loan to meet your personal commitments or for a business purpose? There are two important things that must be brought to your attention. Firstly, there are many different types of loans with interesting terms and conditions. Secondly, the terms of a loan and the type of loan granted by a bank is particularly based on the creditworthiness of the individual. The creditworthiness of the individual mainly depends on the repaying ability of the individual which has to be substantiated in one way or the other. If your credit score isn’t impressive, you can get over the risk of a refused loan by going for a secured loan.

A secured loan as the term suggests is a loan that is secured against the worst case scenario, where the borrower forfeits the loan due to financial trouble. Most lenders are wary of borrowers who cannot make payments in time or repay the loan during the specified time period. At the same time, borrowers especially banks and lending institutions, have to identify other alternatives through which money can be lent out. This is because interests form a major part of the income stream for lending institutions. Hence, borrowers who are concerned about a refused loan can request for secured loans from banks that are willing to dish out appropriate terms and conditions with collateral involved.

The most important component of a secured loan is the collateral involved. This could be any asset provided by the borrower as a security for the debt taken from the lender. The lending institution will have rights over the asset as long as the debt isn’t repaid by the borrower. Properties are mostly placed in line for such loans. A refused loan could be a huge problem for an individual with a low credit score or with existing debts. Most lenders look for a steady income before offering unsecured loans. In the absence of a steady monthly income or evidence of it, secured loans are provided to individuals who can promise assets with comparable evaluation. The collateral is something that can be auctioned by the lender to recover the debt, in case the borrower fails to do so in the requisite time.

A secured loan is a better option compared to a refused loan, especially when you are in dire need of funds for your personal expenses or businesses. However, secured loans are riskier when compared to unsecured loans. This is because a collateral asset is at risk and by missing on-time payments you stand the risk of losing your assets to the lender. Moreover, these loans are offered to individuals without the right levels of creditworthiness.  Hence the interests are higher compared to the interest rates on unsecured loans. This increases the chance of increased debt, particularly if on-time payments are not made. The assets could not only include property, but also other items of value, like raw material, stock, vehicle or jewellery. Thus, one would do well to compare advantages and disadvantages of secured loans before taking a call.

Are you being refused loan by credit unions and banks? Please visit our website to apply for a secured loan and eliminate rejections.