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Getting a Secured Loan

April 11 2017, 10:58am

A lot of people don't understand the difference between a secured loan and a unsecured loan, one of the major differences between the two, is that a secured loan has an asset attached to it, while a unsecured loan does not. This means that a secured loan will have some kind of net value asset that will be taken away in the event that the loan cannot be paid off.

The secured loan will have an interest rate attached to it, the interest rate will often times be very low, because unlike a unsecured loan, a secured loan is a lot more safe and less likely to incur risk to the creditor. This only risk that is often associated with secured loans is that the asset that the loan is attached to is under leveraged, which means that there are also other debt on it, and the creditor might not be willing to give the loan because they are the future creditors, which means in the event of a default, the other credits would be paid off from the asset first.

This can pose a huge risk to creditors and therefore it is unlikely for a creditor to give out a secured loan if there is other loans already on it that exceeds the value of what the asset is worth. You need to know how much loans are already on the asset you are planning to borrow against for the secured loan. You want to do a evaluation on the likely interest rate that will be given due to the value of the asset, and the likelihood that the loan will be approved. This will all depend on whether or not the asset already has loans against it, and whether the asset has a high valuation.

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