Secured personal loans are sanctioned at a low rate of interest in comparison to unsecured loans. Secured personal loans can be availed by placing security as collateral. Collateral can either be the borrower’s home, land, etc. The loan approval is usually an easy process as the loan amount is secured against the collateral. Additionally, secured loans are best suitable when the borrower needs a large loan amount and/or they face difficulties in receiving unsecured personal loans in the case of having bad credit history. Usually, these loans have long-term repayment periods and relatively low interest rates which lead to low monthly installments. However, loans of this type tend to take longer to get issued given that the collateral should be appraised before approval.
Secured personal loans can be used for a wide array of purposes such as buying a new car, financing higher education, medical expenses, home improvements, holidays etc. Another common use of secured personal loans is debt consolidation in case of existing older loans with high interest rates.
As in the case of other loan types, secured personal loans come with either fixed or variable interest rates. Personal loans with fixed interest rate have a preset interest rate for the entire period of the loan implying that the monthly installment will not change during the life of the loan. On the other hand, personal loans with variable interest rate have a fluctuating interest rate that is correlated to the prevailing market interest rate implying that the monthly payment is changing in tandem with the underlying interest rate. The interest rate of secured personal loans is lower than that of unsecured personal loans given the lower level of risk incurred by the lender, however it may vary from loan institution to the next. Needless to say that the borrower should spend a good amount of time and effort checking online and comparing the loan options available and their terms, costs and conditions.