Knowing the difference between these two types of loans could make a big difference in your debt situation!
Let’s talk about secured loans versus unsecured loans. Do you know the difference?
A secured loan requires you to put up some form of collateral in order to get the loan. You have to provide something of value that the lender can use to recoup the money in case you don’t pay back the loan. This could be a house, a car, or even an expensive watch. Because the lender has this collateral, secured loans tend to have lower interest rates. Your mortgage is an example of a secured loan, because if you default, the bank can take your home.
On the other hand, an unsecured loan doesn’t require you to put up any collateral. The decision is based on your credit worthiness. However, interest rates tend to be higher because the lender is taking more risk on lending you money. Credit cards and personal loans are examples of unsecured loans.
Knowing the types of loans available and understanding what they are can make all the difference.
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