There are virtually hundreds of different loan types out there and it can be confusing to find the one that is right for you. With so many terms floating around it is very easy to get frustrated and give up the loan hunting process. There are some loan types however that are fairly common and the two types we are going to discuss are secured and unsecured loans.
What is Secured Loan and Unsecured Loan?
A secure loan is the most common type of loan you are going to come across. A secure loan simply means that the borrower has put some sort of collateral up against the loan should they not be able to pay or should they try to default on the loan. A great example of this is a car loan. When you take out a car loan the car itself becomes the collateral and the lender can repossess or take back the car if you do not make payments.
An unsecured loan is a loan that is given with nothing more than a written agreement. This type of loan is going to be based almost entirely on your credit score and your credit history. This type of loan is much harder to get and can be a terrible idea if you are not really all that great at paying back what you borrow. This is also called a signature loan or may also be called a personal loan and in most cases, banks are leery about lending out this type of loan.
So Which is Best For You?
The answer to that lies in your credit score. If you have a very low credit score and a bad credit history, you are going to most likely be better off applying for a secure loan as you are more likely to get approved for this type of loan. If you have a good credit score and history you may be able to get approved for a personal loan or unsecured loan.
The real root of the matter is that the lender does make a huge difference. Some lenders never check credit scores while others only approve those with a credit score that meets their standards. Take the time to consider what type of loan is going to work best for you then seek out a lender that meets your specifications in order to get the right loan for you.