Difference Between Secured Loan And Insecured Loan

Difference Between Secured Loan And Insecured Loan

 

Loan is of two types, the first one is a secured loan while the other one is an Insecured loan. these types of loans are named on the basis of the conditions the borrower and lender agree upon and the sort of contract between them.

Difference Between Secured Loan And Insecured Loan

Difference Between Secured Loan And Insecured Loan

1. Secured Loan :-

The first type of loan is an secured type of loan, as the name suggests, this type of loan offers security of money both to the lender and the borrower and hence remains a fair method of payment and lending. a secured loan is a loan in which an agreement is made that if the borrower is not able to repay the money back, the property put by him as a collectoral might be used to recover the sum back. a common example of this type of loan is a mortgage loan,
in this type of loans, the individual takes a loan in order to purchase a house and the bank pays him the sum of the loan on an agreement that if he is not able to pay the loan amount in time, his house may be repossessed by the bank and sold off to recover the sum back.

The case with auto loans may be either direct loan or an indirect one.
in the direct loan, the bank gives the sum directly to the customer and in the indirect loan the loan amount is subjected to the intermediary people involved in the deal.

2. Insecured Loan:-

the second type of loan is an un-secured type of loan. As the name suggests, this type of loan does not remain secure for both the lender and the borrower depending on the conditions and contract involved in the deal between them.
These are the monetary type of loans that are generally insecure against the individual’s assets who borrows it.
the rate of interest is liable to depend on the lender and the borrower in all the cases of un – secured loans. There may or may not be the interference of law in these types of loans.

The rate of interest in these types of loans is always larger than that for the secured types of loans. the lender in this type of loan has himself to deal up with the borrower and to obtain capital decided in the contract and then persue the judgement execution. But this type of loan is associated with a great amount of interest and hence besides the risk this loan is also practiced among the lenders and the borrowers.

 

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