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Difference Between Secured And Unsecured Personal Loan

January 05, 2024 • 887 views

A Personal Loan can be a great way to cover important expenses like home renovations, weddings, or unexpected medical bills. There are two main types of Personal Loan: secured and unsecured Personal Loan. It's important to understand the differences between secured and unsecured Personal Loan types so you can make an informed decision about which one is best suited to your needs.

Secured Personal Loan

Secured Personal Loan require collateral or a guarantor to get funds. Collateral can be a home, car, or other valuable assets. If the borrower defaults on their payments, the lender can seize the collateral. Secured loans have lower interest rates and higher borrowing limits than unsecured loans. One benefit of a secured Personal Loan is that you can usually borrow more than with an unsecured loan. This is because the collateral provides security in case of a default. Secured loans also have lower interest rates because the lender takes less risk with collateral as a backup. However, secured loans have downsides too. Losing your collateral is a big concern if you default on the loan. You need to be careful when deciding to take a secured Personal Loan. The process of applying for a secured loan can be more intricate than that of an unsecured loan. The lender inspects and evaluates the collateral before approving the loan.

Also Read - What is Secured Loan? Meaning & Definition

Unsecured Personal Loan 

An unsecured loan doesn't require collateral or a guarantor, but usually has higher interest rates and lower borrowing limits than secured loans. You don't have to provide collateral for an unsecured loan, and the application process is often simpler and faster than for a secured loan. However, unsecured loans usually come with a higher interest rate when compared to secured loans.

Which Loan is Right for You?

When deciding between a secured and an unsecured Personal Loan, you should consider your individual circumstances. If you have valuable assets that you are willing to put up as collateral, a secured loan may be the right choice for you, especially if you need to borrow a large amount of money. However, if you don't have any valuable assets to use as collateral or are uncomfortable risking losing them, an unsecured loan may be a better option. You must consider the interest rates and fees related to each loan type. Although secured loans typically have lower interest rates, they may come with higher fees such as appraisal fees or origination fees. On the other hand, unsecured loans may have higher interest rates, but they often come with lower fees. Finally, you should consider the length of the loan and the repayment terms. Secured loans are often for longer periods of time, such as five or ten years, while unsecured loans may have shorter repayment periods, such as three or five years.

How to Apply for Unsecured Personal Loan?

You can apply for a Personal Loan by following these three simple steps:

  • Step 1: Click on the ‘Apply Now’ button.
  • Step 2: Fill in the required details on the loan application form.
  • Step 3: Upload necessary documents.

On successful verification, the loan amount will be disbursed into your bank account instantly.

Also Read - Secured Loan vs Unsecured loans | What's the Difference?

Conclusion

When it comes to Personal Loan, you have two options to choose from: secured and unsecured Personal Loan. Both have their own advantages and disadvantages. Secured loans have lower interest rates, but you need to provide collateral, which can be risky if you default. On the other hand, unsecured Personal Loan do not need any collateral, but they have a lower borrowing limit than secured loans. The choice between the two types of loans depends on your financial goals and individual circumstances. Therefore, it's essential to do your research and compare Personal Loan offers from different lenders before making a final decision. Remember, a little effort spent choosing the right type of Personal Loan can save you a lot of money in interest rate payments in the long run.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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