It is a widely known fact that by taking secured loans and pledging assets as security, the borrowers run the risk of losing their home or any other asset that has been placed as security. Many borrowers are put off by the risk involved in taking secured loans. But still these loans are quite popular and sought after by borrowers. This is mainly due to the many benefits that are enjoyed by borrowers of these loans.
The main benefit due to which these loans are highly sought after is their cheap rates of interest as compared to unsecured loans since security is involved in these loans. Collateral provides guarantee to the lender and so, the lender is ready to give a loan at a low interest rate to the borrower. Other factors like a good credit history and high value of the security can further reduce the interest rate on the loan.
Secondly, borrowers are often able to raise a big amount by getting secured loans. This amount is sufficient to cover large expenditures like home improvements, car purchase, repayment of several earlier debts and so on. The loan amount sanctioned is usually dependent on the value of security given. Thus, if a borrower gives a house or any other real estate property as collateral then he or she can expect to raise a higher amount than if any other asset like a car is given as collateral.
Secured loans also have a long repayment period of up to 25 years and due to that the monthly payments are low. This amount can be easily affordable to the borrower. Hence, the borrower can easily get a large amount of money and then pay it off in easy monthly installments. Thus, the option is quite attractive for the borrowers.
These loans may also be availed by people with a bad credit score. Thus, such people regard these loans to be a blessing, since it is quite difficult for them to get a loan otherwise. Although the bad credit score might not affect the lender’s decision regarding loan approval, it can affect the interest rate charged and other terms and conditions.
Borrowers are also able to easily get these loans. Since they get guarantee in the form of collateral, lenders are more than willing to give secured loans. Moreover, there is a large market for these loans and the market includes local lenders, banks and online lenders.
Since the lenders do not place any restrictions on how the funds of these loans are used, the borrowers are free to spend them in any way they wish. They can spend it on various things like home improvement or education.
Thus if the borrower can give a collateral and can handle a loan, it is advised that he or she opt for a secured loan and avail all the benefits mentioned above.