When you are in need of money urgently, the first option you think of maybe a loan. However, for most individuals, the decision about which kind of loan to opt for is a difficult one. The lack of familiarity with loan products is the main reason for this confusion and it is also the reason why many people end up with a loan that is not quite the right fit for their situation. For example, if you have a wedding to plan for or a vacation for your family to think about, you may be wondering if you should choose a secured loan or a personal loan in Raipur. Here is all that you need to know about both these options and how they compare with each other.
The first point to know is that the secured loan requires that you place some asset of yours as collateral or security towards the loan. This ‘locks in’ the asset for the duration of the loan. If you fail to pay back the loan, then the asset you have placed a collateral is in danger.
With a personal loan in Raipur, your loan is not based on any security or collateral. It is given on basis of your income, your credit score and other factors. The loan does not place a lien on any other asset of yours.
The amount that you can avail of a secured loan has an association with the value of the asset you place as collateral. It may be calculated as a percentage of the collateral asset. This constricts your loan amount and prevents you from getting as big a loan as you need.
With a personal loan, the amount is more flexible and you have the freedom to choose how much loan you take. However, the lender will still factor in your income, your financial health and credit score to determine how much of a credit risk he is willing to take with you. But even so, you have far greater flexibility to choose your loan amount than you get with the secured loan. This can be a huge advantage when you do not have an asset to risk that is worth a lot and that can act as collateral for a loan to cover the big expense you have.
Secured loans are more complex and they have more verification processes involved. The valuation of the asset you will place a collateral is one big aspect that is meticulously carried out with these loans. This is because the loan hinges on this collateral and the lender’s risk is entirely dependent on the proper and accurate valuation done at this point.
For the personal loan, after you have used an online personal loan interest calculator to verify the EMIs, satisfied yourself about the loan’s affordability and made your application along with documentation, the approval is quick. While the lender does verify your credentials and income, the extra step of valuing the asset is eliminated and the approval process itself is far simpler and faster here.
A secured loan is a low risk loan for the lender as compared to a personal loan. That’s why these loans score better in terms of interest rates and you can get a secured loan at a more affordable rate than personal loans usually. This is also one of the reasons why people opt for these loans when they cannot afford a large outgo month after month by way of EMIs.
A personal loan may be more expensive in terms of the interest rates charged on the money borrowed. However, with the right kind of research, you may still be able to find a personal loan that is affordable. Use an online personal loan interest calculator to compare the overall outgo month after month and over the term of the loan with the secured loan options available to you. This will help you understand the exact impact of both the loans and allow you to make a well-informed decision about which to choose.
Keep these points in mind while making your choice between a secured loan and a personal loan in Raipur and don’t forget to make good use of a personal loan interest calculator to get an accurate picture of your financial liability with each before finalizing one.
Also Know: How does the fixed deposit work? How to calculate FD?
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