You are not an owner? Do not worry – an unsecured loan is still a good loan option.
The decision to secure or not your loan will establish:
Your ability to secure your loan also depends on your available assets.
A secured loan has an asset (more commonly the value of a home). When you secure your loan, the lender applies a “lien” on your asset. This privilege acts as a protection for the lender; If you do not repay your loan, you may become the owner of your asset as a lienholder. By choosing to secure your loan, you give the lender more reason to believe that you will pay it back, which will encourage them to offer you a better interest rate.
The most common example of secured loan is the mortgage taken on a first home; when a person decides to take a mortgage to buy a house, she guarantees the money she borrows (the mortgage) through her new home. Once the mortgage is repaid, the lien is lifted from the house.
A secured loan allows homeowners to get more money and lower interest rates (you can also take longer to pay off your loan).
Learn more about our secured personal loans or our first or second mortgages.
You are not an owner? No problem! Unsecured loans are excellent borrowing options. Or maybe you own, but you need to get the money very quickly. In such a case, an unsecured loan could be a better option for you.
An unsecured loan has a signed loan agreement rather than assets. The borrower and the lender work together to determine the amount of the loan (the amount you can borrow), how long it will take (the number of months that will be needed to repay the loan), and the interest rate. Then, the borrower signs a contract that states that he agrees to repay the loan amount over the established term and at the agreed interest rate.
To get money through an unsecured loan, you do not have to own. In addition, the application process is faster and no penalty is charged for an advance payment (this is a great option if you like having the option to pay back your loan faster).
What distinguishes a secured loan from an unsecured loan:
We generally recommend that homeowners secure their loans in order to take advantage of lower interest rates and higher borrowing power. However, it is your priorities that will allow you to determine which loan is best for you: