Melbourne, Australia, June 20, 2021 / PRNewswire / – What is the difference between a secured and unsecured loan and what factors should be taken into account in deciding which loan is most suitable? The leading financial broker National Loans, which offers a range of asset finance solutions, such as lump sum car loan, caravan financing and boat financing, explains that a secured loan is a loan “secured” against something, such as a car or a house.
Essentially, an asset, or part of it, is offered to protect the lender against the risk of default on the loan. In the event that a secured loan cannot be repaid, the lender would sell the asset to cover the value of the loan.
According to National Loans, the interest rates of secured loans are generally lower than those of unsecured loans because the lender enjoys additional financial security. Some assets that can potentially be used for security include a cash deposit, property, or equity in property, vehicles, or equipment, such as a car, boat, motorcycle, or farm machinery, as well as valuable items such as works of art or jewelry.
On the other hand, National Loans asserts that an unsecured loan does not require the borrower to present some form of collateral to the lender. Lenders assess potential borrowers differently, depending on whether they are applying for a secured or unsecured loan. With an unsecured loan, the lender places more emphasis on factors related to the borrower’s financial condition, such as income and credit rating. This allows them to determine the borrower’s ability to repay the money.
National Loans points out that because unsecured loans carry a higher risk for the lender, the interest rate is generally higher. In the event that the borrower cannot repay both a secured loan and an unsecured loan, the lender has the option of taking legal action.
When deciding which type of loan is most suitable, National Loans says the borrower should consider the overall cost of the loan. There are a number of factors that will influence the cost, including the amount borrowed, the length of the loan, the interest rate, and the fees.
National Loans can provide financial solutions to borrowers looking for a caravan loan, boat credit, auto credit or any other type of personal or commercial credit. Offering loan terms of one to seven years and fixed interest rates, the online application process is straightforward.
Lump sum auto loans
Lump sum auto loans
SOURCE National Loans