Secure/Unsecure Personal Loans

[vanders]

Hi All

Can someone please briefly explain to me the difference between a secure loan and an unsecure loan?

My guess is that a secure loan means that you can't change the amount of the loan at any time, and an unsecure means that you can ask for more money somewhere down the track, but I don't know if thats right.

A little help would be great!

Also, who is the best bank/institution to get one from?

Thanks

 

[TheBloods]

A secured loan simply means it is secured over an asset, such as property.

For example when you borrow to buy your house the bank takes a mortgage over your house, so the loan is secured by the mortgage on the house.

An unsecured loan means there is no security.

From a bank's perspective, a secured loan is better because if you default then they have first call on the asset securing the loan. They can seize it and sell it to repay the loan.

If the loan is unsecured then if you don't repay the bank is simply another creditor.

If your loan is secured and you want to sell the security you typically need to bank's permission to do so.

Depending on the type of loan and the amount of security overcover it can be a lot easier to increase you loan when you have security.

Your loan should be cheaper if secured.

It's far easier to get a loan approved if you have security.

A downside is that although legally the borrower is in no worse position, the bank can find it easier to act and seize the security if you default on a secured loan.

 

[Lensen]

Secured loans are loans with some sort of security - registered mortgage over property, shares etc.

Unsecured loans have no security - and are charged at a much higher rate.

 

[vanders]

Thanks folks

 

[rick James]

Secured loans are loans with some sort of security - registered mortgage over property, shares etc.

Unsecured loans have no security - and are charged at a much higher rate.

disagree.

CBA for example, don't hold security on any of their personal loans. teh rate is flat accross the board.

the only time security will reduce the inerest rate is on a car loan, which is slightly different from a personal loan - and often the newer the car the further the rate reduces.

 

[karikature]

in secured loans if you fail to pay back, they can take back the "collateral" such as your house, car, bank account $$

in unsecured loans, they can't do that