Secured or unsecured loan? Here’s a guide.

1. Secured loan is taken against any collateral like house, land, car or jewellery. It is easy to get since the lender can sell the collateral if you default.

A. Secured loan types
1. Loan against property
2. Auto loans
3. Invoices

B. Pros of secured loan
● Low interest rates
● You might get the loan even if you don’t have a superb credit score
● You can borrow a large amount, based on your credit history and value of the collateral
● Long repayment tenure

C. Cons of secured loan
● If you default, you might lose your collateral
● Long tenures inflate the interest burden

2. Unsecured loan needs no collateral and is approved based on your creditworthiness. Since the lender’s risk is high, the interest rates are high and repayment tenures and loan amounts are small.

A. Unsecured loan types
1. Line of credit
2. Term Loan

B. Pros of unsecured loans
● No collaterals required
● No risk of losing assets kept as collateral
● Loan application and processing is fast

C. Cons of unsecured loans
● Small loan amount
● High interest rates
● Impressive credit score required

What you choose depends on your ability to repay, attitude towards risk and need. In both cases, you need a good credit score and should repay on time.

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