While most people usually choose between secured loans and unsecured loans while borrowing money, this comes with a paradox. Secured loans, being collateralized, can present certain advantages that are unique to them. These benefits may include lower rates of interest or increased borrowing capacity. For Loan Guru, knowing the details of secured loans is one way to empower your borrowers.
Secured Loans
Secured loans are loans from banks that require lending you the ownership of some asset belonging to you as collateral. It may include your house, car, or savings account. It is for this collateral that the lender offers a secured loan. Then there are unsecured loans, where the lender does not demand any collateral. These loans solely depend upon the credit score of the borrower. However, because of the increased risk of unsecured loans, lenders normally charge them at higher interest rates. Loan Guru can guide you to choose the best type of loan according to your need.
The Benefit of Lower Interest Rates
One of the most important benefits of secured loans is that they might bear lower interest rates. The Consumer Financial Protection Bureau report stated that the amount that you borrow can come with rates that are up to 30% less in comparison to the rate carried by unsecured loans.
In exchange for the provision of a secured loan, the lender mitigates significant risk in its exposure to the borrower. When a borrower defaults, the lender can recover his loss by exercising on the collateral. Mitigation of such risk enables lenders to offer lower interest rates. Loan Guru is your one-stop solution for all your loan needs.
For secured loans by Loan Guru, the periods of repayment generally tend to be longer. For instance, mortgages will pay over 15-30 years. Personal loans usually offer a period of 10 years. In general, longer loan terms may help individuals obtain lower monthly payments and require a smaller interest payment sum.
Often, the collateralized borrowers are considered to be risk-free borrowers. As a result, the creditworthiness in the lenders’ books improves. This stability translates into better loan offers with even lower interest rates.
Unlock Larger Borrowing Power
There is another advantage of secured loans from Loan Guru. They may offer you a greater ability to borrow. This implies that secured loans carry a high potential for borrowing compared to unsecured loans. Here’s why secured loans have higher borrowing power:
- Loan Amount: As the asset will cover the loan, then lenders will be more liable to provide you with larger amounts of money. For instance, a home owner could qualify for a home equity loan or home equity line of credit through which he could borrow as much as 80% of his home’s value, based on its value. Equifax states that the average amount borrowed with a home equity loan in the US is between $25,000 and $50,000, significantly higher than the amounts usually loaned under unsecured personal loans.
- Affordability: Low interest rates and higher sums, as in larger loan amounts, make secured loans from Loan Guru more economical to take out and make payments on. That same affordability can let people use considerably higher loan sums to finance major investments such as purchasing a home or financing education without suffering the financial strain of larger payments each month.
- Flexibility of Use: Secured loans from Loan Guru can be obtained to fund home improvements, consolidate debts, or for a major purchase. With a higher sum that is now accessible for borrowing, a person can use the money to change his financial situation and come closer to his long-term goals.
Significance of Responsible Borrowing
Although secured loans from Loan Guru have numerous advantages, secured loans should also be taken cautiously by a borrower. Defaulting on a secured loan can incur loss of the underlying collateral, which may prove disastrous for a borrower. Here are some tips that will ensure responsible borrowing:
- Assess your current financial status: Before securing a loan from Loan Guru, you should evaluate your financial status first. Try knowing how much is your income, expenses and current debt obligation, and determine the amount you can take the loan for.
- Identify a Right Lender: Research the lender who gives the most attractive terms and cheaper interest rates. Loan Guru actually produces a comparison of loans to help make a decision.
- Understand the Terms: Read the loan agreement carefully, to understand the terms and conditions, interest rates applied, repayment schedule, and fees applicable.
- Plan Repayment: Have a solid plan to repay the loan. Stick to your budget, and prioritize your loan payment in order to avoid default.
Conclusion
Secured loans from Loan Guru would be able to offer distinct benefits because they could help individuals have low-interest and higher borrowing abilities. The proper approach combined with a bit of strategic planning will let the borrower use secured loans in an efficient manner for achieving financial goals without extreme costs. Here at Loan Guru, we are here to guide our clients through the loan landscape, helping them identify the best secured loan options which answer their needs. If you want to consolidate debt, finance some huge buy, or invest in your future, secured loans may be an option for you.
