Nowadays, the availability of a personal loan has eased us off the pressure of looking for funds during emergencies. Personal loans are easy to apply online, and with quick approval and money within 24 hours.
However, the question that looms large in the mind of potential borrowers is whether to go for secured or unsecured personal loans. Hence, if you are also stuck in that situation, it would be better to study the differences between them and then decide.
What is a secured personal loan?
A secured personal loan, as the name suggests, is taken in lieu of some collateral or security. As a result, a borrower needs to pledge an asset to get the loan from a bank. Such loan is availed by people with average or poor credit history and knows that their unsecured personal loan application will be rejected.
The benefit of applying for the secured personal loan is that compared with the unsecured loans interest rate, the interest rate on this is lower. If the borrower is unable to repay the loan within the tenor, the lender can seize the asset to recover the money.
What is an unsecured personal loan?
The unsecured personal loan is taken without submitting any security or collateral to the lender. It is approved on the basis of your credit score, repayment history, and income record. The loan’s risk is higher on a bank’s end as they can’t acquire if a person defaults. As a result, the unsecured loan interest rates are higher compared to a secured loan.
Secured or unsecured personal loan – which is better?
There is nothing good or bad in both types of loan else lenders won’t be promoting them so much. It all depends on your requirement and the repayment capacity.
If you don’t want to handle a higher loan rate, and reduced EMIs, you can opt for a secured personal loan.
On the other hand, if you have the financial capacity to handle higher unsecured loan interest rates, then you can go for another one. The benefit of applying for the unsecured personal loan is that you won’t need to pay any collateral for it.
Hence, you can pick either the secured personal loan or an unsecured personal loan as per the needs, repayment capacity, and income and of course the Credit Score, which will show the person’s repayment capability.
For what purposes you can use both the personal loans
Both personal loans types are available for all personal requirements such as:
- For debt consolidation
- For the expenses of an upcoming marriage
- For sending your children for higher education overseas
- For expanding your business
- For constriction, purchase or renovation of a home
- For paying the costs of a medical emergency
- For all other personal needs as per a borrower’s legal preferences
Applying for an unsecured personal loan or secured personal loan is easy as you can do that online and save your time and efforts.
Bajaj Finserv offers pre-approved offers on personal loans, home loans, business loans, credit cards, EMI finance and more. It is to simplify your loan procedures and make it hassle-free and faster for you.