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Secure Loans

Updated on June 5, 2011

Secured Loans

 

What is a secured loan?  A secured loan can provide a borrower with a chance to receive money for something in their life when they don’t have enough money saved up.  A secured loan can be used for just about anything.  A secured loan is a type of loan where the borrower provides some sort of collateral to the financial institution for assurance that they will repay the loan.  Usually a secured loan is given to those in a higher credit risk category.  With all loans there are benefits as well as down sides.

 

If you are a high credit risk it can mean many different things, like you have unsteady income like self-employment.  With self-employment your income will vary from month to month making it unsteady.  Although this is a source of income lenders will see this as less reliable as a regular paycheck.  Decisions are often based on the loan officer or manager weighing three variables:

  1. The financial institutions regulations on loans.
  2. The length of time you have been self-employed.
  3. The loan amount you are requesting.

Get a secured loan for a vehicle
Get a secured loan for a vehicle
or for whatever else you may need
or for whatever else you may need

 

High risk can also refer to a person as having poor credit or not enough credit.  Not having enough credit can generally mean that you are young and haven’t built up a good credit history yet.  With having poor credit, this can generally mean that you have had poor money management or something happened in your life that was beyond your control.  Establishing a credit history can be a very daunting task.  It is also frustrating because no one wants to give you credit to establish your credit.  One word of advice: start small and maintain a good credit history as you go and never over extend yourself.

 

If you are new to the credit game, taking on a small secured loan can be a great way to establish that needed credit history.  By partaking in the secured loan you will start to earn trustworthiness with future creditors.  Credit is an area of life that will make or break you so use the opportunities you are given wisely.  When you take out a secured loan you are given a set amount to pay each month for a certain number of months.  You can opt to go to term, meaning go all the way to the last payment with regular payments, or you can pay off the loan before the last payment.  By paying the secured loan off early you can increase your credit rate faster than normal.  A secured loan is a great tool for you if you don’t qualify for a regular unsecured loan.  The secured loan will give you that opportunity to get the money you need and to build or rebuild your credit rating.

 

Secured loans are not all milk and honey though.  Before you even consider a secured loan you need to think about what you are putting up as collateral.  When you put an item up for collateral on a secured loan you are putting that item at risk.  The most common collateral item that runs the risk of loss is a vehicle.  This of course can only be a free and clear vehicle, I.E you have the title to it.  No one ever expects to default on a secured loan or an unsecured loan for that matter, but if you do default on a secured loan you run the risk of losing that car.  The financial institution will generally grant you opportunities to make up the missed payment but if you don’t they will come to collect the collateral.

 

To be fully protected you must be realistic with your needs.  If you have troubles committing to your financial obligations then don’t create more hardships for yourself with a secured loan.  As I said, be realistic with your needs.  If you need $4,000.00 to do the job and the loan officers tells you he can get you $8,000.00 use your head.  It is far easier to pay off $4,000 than it is to pay off $8,000. 

 

A secured loan is a great financial tool to reestablish or to establish your credit history and rating while at the same time allowing you to do what you need to do.  Just use caution and do your research before applying for a secured loan and watch the interest rates.

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