Question: Do you find yourself in a situation where you need cash fast? Maybe you need it just for a short period to tide things over. Perhaps you are facing some unexpected big expenses suddenly, or you simply need to get to the end of the month. Or perhaps there is an opportunity that came along that is simply too good to pass up, but you need some cash to make it happen. Another question: Do you own an asset, like a car or another type of vehicle? If your answer to both these questions is yes, secured loans might hold the key to provide you with the bridging finance you are after.
What exactly are secured loans?
Secured loans are a type of credit facility whereby the person who is borrowing the money provides an asset as collateral in exchange for the loan. Because the borrower supplies security for the money, it makes this type of credit less risky for the lender. This, in turn, potentially makes the loan more affordable for the borrower, as less risk typically means more favourable interest rates. However, if the borrower cannot repay the loan, they stand to forfeit the asset they used as security to the credit provider.
The important thing is to look at your specific situation and decide what is best for you. To help you decide whether secured loans are, in fact, the right solution for you, let us take a look at some of the pros and cons of this type of credit.
Pros of secured loans:
- Fast processing time: Most secured loans are processed, approved, and paid out in a very short amount of time. All that is needed is for the value of the asset that is used as collateral to be verified. This is very handy for those who are looking for a quick cash injection.
- You do not need a perfect credit rating: This type of loan is usually much easier to get than a personal loan from a bank, especially if your credit rating is compromised. This is because you provide security for the loan amount in the form of an asset.
- Better interest rates: Because you are providing collateral as security for the credit, there is less risk involved for the credit provider. This could potentially mean better interest rates than you could secure with other comparable loans, even if your credit rating is less than perfect.
- They could help you build a credit rating: If you have little to no credit history, you might struggle to secure a loan. Because secured loans are easier to get approval for, this can help you build a good credit rating – if you stick to the repayment terms.
Cons of secured loans:
- You could lose your security: As with all credit, secured loans do come with risks. If you do not pay the loan in accordance with the repayment agreement, you stand the chance of losing the asset you pledged as security. If it is a car, this means that you may be left without transport.
- You must own an asset: In order to qualify for this type of credit, you must own an asset, such as a house, car, or another type of vehicle. The asset must be fully paid off.
- The asset must have value and be legal: The asset you use as security will determine the value of the loan. If the asset is worth nothing, you will not get a loan. Furthermore, if you are using a car as collateral, it must be drivable and licenced.
If you want to know more about secured loans, contact XCELSIOR.