When deciding to take out a loan, it is important to have a solid understanding of how the borrowing process is affected by a secure vs unsecured loan. There are some key differences between these two types of loans, and each has an impact on important factors such as interest rate and borrowing limits.
What Type of Loan Do I Want?
If that’s a question you’re asking yourself continue reading to see how secured and unsecured loans differ and what each means to you.
A secured personal loan is a loan that is backed by a valuable personal asset, such as a vehicle, house, expensive jewelry, or other material goods that have a high value. These loans tend to have lower interest rates and higher borrowing limits because the lender can take possession of the item that is being used as collateral in the event the borrower fails to pay. The lender then sells the item to pay the outstanding debt.
Secured loans are often faster and simpler to obtain and easier to pay off due to lower interest rates. Borrowers also have the added security of knowing the loan can be paid off using the collateral if the need arises. Common examples of a secured loan are a mortgage loan and an auto loan.
An unsecured loan is money borrowed based on an agreement to pay the money back, and is not secured by any personal assets. If a borrower fails to pay an unsecured loan, the lender cannot immediately seize any specific personal property to pay the debt. Since the lender is taking on more risk, interest rates tend to be higher and the borrowing limits lower. Due to the increased risk to the lender, a solid credit score and a certain income level are often required to qualify for an unsecured loan.
While unsecured loans do not come with the risk of having specific personal property seized in the event the borrower fails to pay, they tend to be more difficult to pay off than secured loans, due in part to higher interest rates. Examples of unsecured loans include student loans, personal lines of credit, and credit cards.
Benefits of Security
Considering the difference between secure and unsecured loan types and due to the greater benefits and lower risk of secure loans, The Lux Exchange specializes in providing clients with capital in exchange for personal assets such as high-value jewelry, luxury cars, gold and precious metals, and other luxury items. Our borrowing process is fast, secure, and discreet.
Secure the Cash You Need from Lux Exchange Today
Whether our clients desire to finance a business or need extra finances due to an unexpected life event, Lux Exchange provides secured loans in a timely and efficient manner. Contact us today to see if Lux Exchange is the right kind of loan service for you.