NEW YORK, March 29, 2023 (Newswire.com) - OneMain Financial: Secured loans offer a tangible solution for those in need of financing that may not qualify for other loan or credit options. With the potential of a lower interest rate and greater approval chances, secured loans are often the best option when immediate funding is required to cover significant expenses such as home remodels or vehicle purchases.
This article will provide a brief overview of the basics of what a secured loan is and when a borrower should consider this type of financing to fit their situation.
What is a secured loan?
A secured loan is secured with collateral. Collateral is anything of value a lender is willing to accept as security for a loan. Collateral can be a house, car, cash in a savings account, boat, fine art, jewelry, or collectibles. The lender can seize the collateral if a borrower defaults on a secured loan. That's why consumers should only consider a secured loan if they are confident they can repay the loan according to the loan agreement terms.
How does a secured loan differ from an unsecured loan?
While a secured loan requires the borrower to pledge collateral, an unsecured loan does not. This means the borrower who gets an unsecured loan does so without putting an asset on the line. Lenders offering unsecured loans typically evaluate prospective borrowers based on factors like their credit score, income, and employment history.
Benefits of a secured loan
A secured loan comes with some advantages, including:
Easier to qualify for a loan: A secured loan may have more lenient qualification criteria than an unsecured loan. If the consumer does not have good credit, getting approved for a secured loan may be possible if the collateral is acceptable.
It may be more affordable: The borrower may be charged a lower interest rate since a secured loan poses less risk to the lender.
May have a higher borrowing amount: The borrower may be offered a higher borrowing amount with a secured loan.
Potential downside of a secured loan
While secured loans may be easier to obtain if a borrower doesn't have the best credit, the most notable drawback of this type of loan is the potential for loss of collateral. When borrowers take out a secured loan, they must pledge a personal asset, such as a car or home, as collateral. If they fail to make timely payments, the lender has the right to repossess their collateral and recoup their losses.
In some cases, if the loan balance is higher than the value of the personal asset being used as collateral, the borrower may still be responsible for paying back any remaining debt. This means borrowers must take extra care when considering a secured personal loan and ensure they can meet their loan payments.
How to Get a Secured Loan
Many secured loans are on the market, and lenders offer them to all types of consumers. If a consumer believes a secured loan makes sense in their unique situation, it's a good idea to keep these steps in mind:
Shop around: Not all secured loans are created equal. That's why borrowers need to shop around and compare their options and consider interest rates, terms, and fees.
Read reviews: Once a borrower finds a few lenders that pique their interest, it's wise to read lender reviews on reputable websites to help them find the ideal option.
Apply: Many lenders let consumers apply for secured loans online from the comfort of their own homes. Applicants should prepare to share basic details about themselves and the potential collateral.
Wait for a decision: Depending on the lender and the type of secured loan, the applicant may have to wait a few days or weeks for approval. However, some lenders offer instant or same-day approvals.
The Bottom Line
The consumer who doesn't have the best credit and is struggling to lock in financing but owns something of value and is confident they can make their payments may benefit from applying for a secured loan.
About OneMain Financial
OneMain Financial is the leader in offering nonprime customers responsible access to credit and is dedicated to improving the financial well-being of hardworking Americans.
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Original Source: OneMain Financial: When to Use a Secured Loan
originally published at Lifestyle - Sexy Press