Understanding the Difference Between Secured and Unsecured Loans - PowerPoint PPT Presentation

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Understanding the Difference Between Secured and Unsecured Loans

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You will be faced with many instances in your daily life when you'll require an infusion of cash to meet financial emergencies. In that case, you'll have to decide the type of loan you'll borrow. There are two types of loans you can take: secured and unsecured. But before you choose, you need to understand the difference between taking out a secured and unsecured loan online. It's straightforward – a secured loan typically requires collateral (some property or a vehicle) with a significant financial value that acts as security for your lender. So, if you default on your loan, they can recover their loss using the collateral provided. An unsecured loan, on the other hand, doesn't require any collateral. They are a riskier proposition for your lender than you. So, how do you figure out what to choose? It depends on what your available options are at that point and which is the most affordable one. – PowerPoint PPT presentation

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Title: Understanding the Difference Between Secured and Unsecured Loans


1
Understanding the Difference Between Secured and
Unsecured Loans
2
  • You will be faced with many instances in your
    daily life when you'll require an infusion of
    cash to meet financial emergencies. In that case,
    you'll have to decide the type of loan you'll
    borrow. There are two types of loans you can
    take secured and unsecured. But before you
    choose, you need to understand the difference
    between taking out a secured and unsecured loan
    online. It's straightforward a secured loan
    typically requires collateral (some property or a
    vehicle) with a significant financial value that
    acts as security for your lender. So, if you
    default on your loan, they can recover their loss
    using the collateral provided. An unsecured loan,
    on the other hand, doesn't require any
    collateral. They are a riskier proposition for
    your lender than you. So, how do you figure out
    what to choose? It depends on what your available
    options are at that point and which is the most
    affordable one.

3
Secured Loans How do These Loans Work?
  • You've heard of an auto loan (also known as a
    vehicle loan) and a home loan. Chances are either
    you or your parents have taken such a loan
    already. These are the two common examples of
    secured loans. If you take out a vehicle loan,
    your lender gives you money to purchase the
    vehicle you need. In exchange, he also uses your
    new car (which you haven't yet purchased) as
    collateral for his security. In case you default
    on your vehicle loan and don't repay it on time,
    your lender will take possession of your car,
    sell it, and use the proceeds to cover his loss.
    The same thing happens in the case of a home loan
    as well. Your lender will take ownership of your
    house and use its sale proceeds to pay off the
    debt.

4
Consequences of Defaulting on a Secured Loan
  • The consequences of defaulting on a secured loan
    are pretty severe. Not only will you lose the
    collateral you've pledged against the loan, but
    it will harm your credit score and credit report
    as well. You will be a defaulter in the eyes of
    all the credit rating agencies. So, if you don't
    want to lose your home or car, you need to take
    all the steps required to ensure your unsecured
    loan's timely payment. You also need to know how
    long it will be (from your EMI due date) until
    your lender will repossess what you've put up as
    collateral.

5
Unsecured Loans How do These Loans Work?
  • Unsecured loans are those loans that don't
    require any collateral. The most popular examples
    of small unsecured loans are credit cards,
    personal loans, and student loans. Because
    there's no collateral involved, these loans are a
    riskier proposition for your lender, which is why
    they come with relatively higher rates of
    interest. To qualify for an unsecured loan
    online, you also have to show a solid credit
    score, strong repayment history, and stable
    income.

6
Consequences of Defaulting on an Unsecured Loan
  • While you won't lose any property or your vehicle
    if you default on an unsecured loan online, the
    consequences will still be severe. Your credit
    score will take a big hit, and credit rating
    agencies will also record this default on your
    credit report. It will stay on for an extended
    period. You will also have to spend a lot of
    money on late payment penalties, depending on
    your lender. So, both your credit and finances
    are affected. You will effectively lower all
    chances of qualifying for future loans as well
    because no lender will confidently sanction you a
    loan.

7
In Conclusion
  • Whether you choose to take a small unsecured loan
    or an unsecured one, make sure its the most
    affordable option for you. Most of all, honour
    all your loan EMIs on time to avoid harming your
    credit score.

8
Thanks For Visit.
  • Address for Correspondence   
  • KreditBee, 3rd floor, The Royal Stone Park, No.
    100, Above Honda Showroom, Sakshi Nagar, Pai
    Layout, Bennigana Halli, Karnataka 560016 
    Official Phone 080-44292200
  • Website www.kreditbee.inOfficial Email
    Address help_at_kreditbee.in 
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