Difference between an Unsecured Personal Loan and a Secured Personal Loan

This is the question that most of the customers ask, and even many people are not aware also, that in the market one can avail various types of personal loans. Each personal loan type whether is a secured loan or an unsecured loan has its own requirements.

First of all, let we discuss secured personal loan. As the name suggests, secured loan means getting loan by giving any security to the lender for getting the loan. The most common things that are used to pledge for the loan are like as your property, house, land irrespective of residential or commercial, automobile, gold, investments in stocks or commodities, certificates of deposits, saving account, fixed deposits, bonds, etc.

Lenders feel relax while lending a secured personal loan to the borrower, as the risk of defaulting is low, as the person has provided collateral. In case of default bank will seize the person security that has been provided for getting the loan. The bank provides this loan at low interest rate and for longer repayment period as compared to unsecured loan.

If the borrower does not have any asset to pledge then, person does not qualify to get the secured personal loan. In this case, the person can get unsecured loan, i.e. unsecured personal loan. This is the option that is mostly availed by the customers of the personal loan.

Unsecured personal loan means that the person does not have to provide any collateral for getting the loan amount. This loan is given on the credit worthiness of the customer, so a person can avail this loan only if the customer track record of past credit is excellent.

The person with high credit score has more chances of getting this loan than from the person whose credit score is low. The person with high credit score can also avail high loan amount that too with low interest rate. If the person credit score is poor, then there are chances of getting rejection, even if the person loan is approved in this case, the person will get high interest rate on the loan.

Now days, one can get extremely attractive offers on unsecured loan in the form of reasonable interest rates or any other benefit on the loan. Then also, the loan amount will remain low in unsecured loan as compared to the personal loan and interest rates will also be little high in unsecured loan.