When it comes to loans and debts you can personally take out, there are MANY options out there as outlined in our previous blog post. However, we honestly believe that secured loans are the best option for you to take out a personal loan. There’s quite a few reasons why:
Easier to obtain than an unsecured loan
As a secured loan necessarily means you are putting up collateral against the loan, the lender is more likely to give you a loan due to the fact that they have a lower amount of risk. If you were to default on your loan, they have a great deal of cushioning against any financial damage this can do to them as they will repossess the asset you’ve put against your loan. Of course the downside to this is that if you secure the loan with your home, then default, you will lose your home! Not ideal.
Especially easier to obtain for those with lower credit scores
Due to this lower amount of risk to the lender, it greatly helps those with lower credit scores. Lenders typically look at those with lower credit scores as being more risky because either they haven’t built a history so won’t have an established proof of paying debts on time, or they’ve established they can’t be trusted to use and pay back debts responsibly. If you have a lower credit score, the act of putting up an asset to give acknowledgement to the lender that you’ll take the debt seriously means that while you may have trouble getting other loans, this one won’t be a problem to access!
Typically a lower interest rate
Again, as the collateral put against your loan will reduce risk, this has the added benefit of usually lowering the interest rate on the loan compared to an unsecured one! This is because interest is usually used as a way of both putting off prospective borrowers that could put themselves at financial risk by taking out a loan, as well as providing the lender a financial incentive and profit for providing the loan. At the same time, if an interest rate is too high, then the loan won’t be competitive and people could search elsewhere for the same loan with a better interest rate and that bank loses out on a potential customer and the profit of their interest payments! Therefore it makes sense that as the risk on the loan lowers, the more competitive it should become and the lower interest there should be!
Can get a larger loan amount vs. an unsecured loan
Finally, as unsecured loans can come at a great risk to the lender, you’ll often find you can only take out a small amount for a loan, getting even lower with a low credit score. Secured loans are less of a risk, which means the lender is willing to put more money on the line as you are showing you’re also willing to put more on the line by putting collateral up!
If you’re looking for the best place to find a secured loan, then we’d recommend heading over to Business Loans Options. The site has a fantastic loan calculator, as well as lots more information on the kinds of secured loans you can get both to start a new business, and expand your currently working business.