LOS ANGELES â December 28, 2021 â (Newswire.com)
iQuanti: Installment loans can help you quickly get the funds you need to cover your expenses. With these loans, you can borrow a lump sum of money and repay it in fixed monthly installments. Many lenders have lenient credit score requirements, so you may qualify for an installment loan with poor or fair credit. Let’s dig deeper into the differences between secure and insecure installment loans so you can determine which option best suits your needs.
What is a secured installment loan?
A secured installment loan is a loan that requires the borrower to post collateral as a guarantee of repayment. Since providing collateral makes the loan less risky for the lender, these loans can sometimes be easier to obtain.
An auto loan is an example of a secured installment loan. When you buy a car “on credit”, the car itself is the collateral. If you fail to make your payments, the lender can repossess your car. A mortgage is another type of secured installment loan that uses your home as collateral.
What is an unsecured installment loan?
Unsecured installment loans are loans that do not require collateral. These loans are considered less risky for the borrower, since they are not at risk of losing an asset if they cannot repay the loan. But that means they can be riskier for the lender, so these loans can come with higher interest rates.
There are many lenders who offer unsecured loans to borrowers with poor or fair credit. Some of them will consider factors in addition to your credit score when deciding whether to approve you, such as your income and work history.
Unlike secured loans, you won’t lose anything of value you own if you default on an unsecured loan. But keep in mind that missed or late payments will be reported to the credit bureaus, which can lower your credit score and lower your chances of being approved for credit in the future. Whichever loan option you choose, making regular payments on time can have a positive impact on your credit score.
Which loan is right for you?
When deciding whether to get an unsecured or secured installment loan, consider your individual options and needs. For example, if you own a car and are willing to put it up as collateral, a secured loan might be better suited. Borrowers without this type of security, or those who don’t want to risk it, may consider applying for an unsecured loan. Compare loan options and factors such as interest and fees to decide which type of installment loan is right for you.
Notice: The information provided in this article is provided for guidance only. Consult your financial advisor about your financial situation.
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Secured or unsecured installment loans