The first major difference between secured and unsecured loans is the asset that backs the debt. This is known as the collateral for the loan, which is an asset from the borrower. It could be a house, a car, or even a cash deposit. This is the main difference between the loans because secured loans require collateral, and unsecured loans do not.
The second difference between these types of loans is the flexibility during their respective approval processes. Secured loans tend to be easier to apply for since the debt is secured, and the lender will ask you to put up an asset to guarantee the money you are lent. Unsecured loans, on the other hand, are tougher to apply for because there is no collateral to minimize the lending risk. Therefore, approval is much less flexible for many unsecured loan options.
Not sure which type of loan to apply for? Keep reading to learn more about the difference between secured and unsecured loans. It may help you make an informed decision!
What are Some Types of Secured Loans?
Now that you know more about the difference between secured and unsecured loans, you may want to know more about the types of secured loans. A secured loan is simply a loan that is backed by collateral. The most common examples of secured loans are auto loans or mortgages. In the case of those loans, the car and the house would be the collateral for the loan.
However, the collateral for a secured loan could be many different kinds of financial assets that you own. In some cases, it could be cash or an expensive piece of jewelry.
Another type of secured loan that you may be familiar with is a title loan. Like an auto loan, your car is the collateral for the loan. But specifically for a title loan, the title is used to secure your cash. You can then borrow a percentage of your car’s equity through an auto title loan and turn it into funding you can use for a variety of financial needs. Typically, title loans can be less of a hassle to apply for, even if your credit is not up to par. That is because it is a secured loan, and your credit history is not a focal point of the approval process, although it is still considered. Instead, for a car title loan, your vehicle’s value and income will matter the most regarding your eligibility.
What are Some Examples of Unsecured Loans?
Now that you know more about secured loans, you may be curious about the ins and outs of unsecured loans. Some examples of unsecured loans include personal loans, student loans, and even credit cards. Since unsecured loans do not require a borrower to offer collateral to secure funding, they can be more difficult to acquire. Eligibility for an unsecured loan will depend on an applicant’s creditworthiness and income. This can be tough for borrowers with no credit history or a poor one.
How Can I Apply for a Loan if I Do Not Have Great Credit?
If you are stuck between applying for a secured loan and an unsecured loan, you must consider each option’s pros and cons.
However, if you do not have a strong credit history, you may not have the chance to qualify for an unsecured loan. If that is the case, you can rely on a secured loan to help!
You can use your assets to your advantage and apply for the cash you need through a secured loan option.
Where Can I Apply for a Secured Loan Like a Title Loan?
If you have a paid off or close to paid off vehicle, consider applying for a car title loan, which is a secured loan option! To apply for a car title loan, you will need:
- To be at Least 18 Years of Age, or Older
- Have a Steady Income or Alternative Income
- Have a Qualifying Vehicle
In addition to meeting those initial requirements, you will be required to submit documentation that verifies your identity and vehicle ownership. While that may sound like a hassle, you can apply for title loans online! Just upload your required documents via email or fax during the inquiry process. It does not have to be a hassle