What types of loans are there

Loans fall into two main categories, secured and unsecured. Secured loans can also be called homeowner loans where people who own a home can use it as security. Unsecured loans can be thought of as personal loans, where the customer does not need to provide any asset as security to the lender.

Before approaching any lender, you should know the difference between the two main loan types before making a quick decision.

Secured loans

These are asset based loans where the homeowner has to secure the property to the lender against the borrowing. Due to the security, there is minimum risk for the lender. This financial proposition usually comes cheaper and with more affordable terms.

Unsecured loans

These loans are non asset based loans and can be used for personal requirements. As no security is required, even tenants can also apply for this financial help. The interest rates charged against unsecured credit is higher than its secured counterpart. The absence of property however aids in quick processing of the request.

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Updated on : Dec 17, 2009 10:23 AM
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