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A secured loan gets its name from the security or collateral involved in the process
of lending. This article has tried to find out the reason behind the popularity of
secured loans. It has also tried to find the manner in which secured loans have
withstood challenges from several alternatives over the years.
It is often seen that as the year’s pass, newer alternatives of older things crop up
while the older things fall into oblivion. Secured loans however have withstood
competition from a whole range of financial products such as unsecured loans.
Unsecured loan lenders tried to deflect borrowers from secured loans by showing
them that their home was at increased risk if they took the loan. But, the borrowers who were loyal to secured loans and who knew that secured loan was not as being presented by some others, didn’t move a bit from their choice. Accordingly, secured loans continue to maintain their turf even after years.
Do you know the reason behind borrowers’ insistence to use secured loans? Secured � loans help borrowers enjoy a large number of benefits. And borrowers are not ready to give up these benefits by not taking secured loans.
Before going towards the benefits of secured loans, it will be relevant if we discussed secured loans first. A secured loan is one where the amount is lent to the borrower with a pledge that he will repay the loan after a specified period. To give more teeth to the lender, the borrower will have to present certain collateral.
The list of benefits of secured loans to borrowers is endless. Apart from the standard benefits, there are several benefits that will depend on the case particulars. However, we will only talk about the standard benefits of secured loans in this article.
The very first benefit of secured loans is the cheap rate of interest. After the mortgage, secured loans charge the lowest rates of interest in the personal finance category. Typical APR on secured loans ranges from 6-25%. Almost all other financial products charge a greater percentage as interest. Many borrowers question the differences between the rates advertised and the actual rates that they have to pay. There may be several reasons for these differences. The rates of interest or APR advertised is the standard rate of interest. However, depending on the value of collateral, borrower s credit status, and several other factors, the borrower may not be offered the standard rate. The differences in interest rate may also result because of the delay in accepting the offer. Until the borrower accepts the offer of the loan, the interest rate in the entire market changes. The borrower cannot then demand interest on the rate earlier offered.
Another important advantage of secured loans is that borrowers can draw as much cash as they want. Compare the situation with unsecured loans and you find loan providers cautious in approving loans of higher values. There is always the fear of the nonpayment of the lent amount. In the case of secured loans, the loan provider is free of any such fears. Thus, borrowers have to just name the figure and the loan is ready.
The discussion about the Benefits of secured loans will be incomplete without taking up the issue of easy availability. All financial products are not as easily available as secured loans. It is because of the relative safety that secured loan deals promise to the lender, that no lender will deny these loans to borrowers. Go to any loan provider and you will find secured loan deals.
Secured loans are to be used for a diverse range of personal needs. The benefit of a secured loan is that it can be fine-tuned to any use. Whether it is debt consolidation or undertaking improvements in one home, secured loans work as smoothly as one’s own cash. The borrower receives the loan proceeds and it is up to him how he uses them. There is the flexibility of use in secured loans. Lenders do not interrupt in the manner of use of the secured loan.
The benefits of secured loans can be best enjoyed when the borrower has adequately prepared for its amortization. Would one be able to appreciate the low rates of interest when the asset pledged as collateral is being repossessed by the lender? No! Therefore, preparations for the repayment of the secured loan from the first day itself. Either make a monthly payment to the loan provider or discuss an alternative arrangement with the lender. Choose the method of repayment that best suits you and then clear the burden as soon as possible
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