It’s a fact of life: Sometimes we get hit by the unexpected. Bills can crop up out of nowhere, leaving us struggling to stick to our financial plans. It’s something adults experience and can relate to – and it’s something it’s good to prepare for before it happens to you!
One of the ways you can avoid falling foul of a penny-pinching moment is by understanding fully what types of loans are available to you and what’s in the fine print of those loans. Today we’ll be covering just that, looking specifically at the definitions of secured and unsecured loans and the kinds of situations where you might want to take one out.
Getting this one under your belt will help you do the adult thing a little better and will keep the stress levels down when the unexpected occurs. Let’s take a look; keep scrolling.
So, what’s a secured loan?
As the name implies, a secured loan is one that is linked to some form of asset that you own. These can vary depending on the size of the loan and the lender or broker in question, but a very common example is a property like your house if you own one. In another scenario, your car might be used instead to ‘secure’ your loan.
The benefits of a secured loan tend to revolve around the size of the loan you request from the broker or lender. Namely, a secured loan usually allows you to request a larger sum of money to be repaid over a period of time. It might also allow the person requesting the loan to request a longer repayment period where they pay less in each monthly (or otherwise) installment.
Got it. What’s an unsecured loan, then?
As you might be guessing, an unsecured loan is simply one where the loan is not secured against an asset the applicant owns. Instead, the applicant simply makes their request and, if they are accepted, begins to repay the loan in installments over an agreed period of time. That repayment rate can vary, with helpful modern unsecured lenders offering flexible repayment periods that can ensure the applicant can match their installments to their ability to repay each month.
There are many benefits to an unsecured loan, but two that are most keenly appreciated by modern adults are the flexibility of repayment and speed of application. The approval process for an unsecured loan isn’t tied down by the need to input details about an asset to be tied to the loan, allowing for modern online lenders and brokers to provide quick service. This can be useful for a responsible loan that is needed in a short period of time.
Why might I need an unsecured loan? What’s an example?
One of the more common reasons adults request unsecured loans is to deal with emergency costs that were unexpected. Particularly common in these cases are loans to help pay for a car or home repairs – the former being especially important so that a person can get to work reliably.
There are many other reasons an adult might request a loan of this nature, however. They may be looking to buy a new car, for instance, and would benefit from additional funding to help them secure a higher quality motor or one that’s on sale at a steep discount.
We hope that helps!
A little more detail to help you make informed decisions as life goes on. The Everyday Loans team hopes this one helped and wishes you the best of health and fortune as the year rolls on! We’re right here if you need our assistance. Have a great day.