When you plan to buy a house or planning for your own startup business but the funds are not sufficient. In that case a loan comes to your mind to resolve the problem. Paying in installment is better rather than paying the entire amount in one go. There are two types of loans and many people have confusion regarding
what is secured and unsecured loan. We will look into that and also find out ‘is home loan a secured loan or unsecured loan?’.
What is a secured loanSecured loans is a type of loan where certain assets are kept as collateral. The bank or any financial institution will hold the deed or title until the full amount of loan is repaid. Once the loan amount is paid the title or deed will return back to the respective owner.
Types of collateral can be used in secured loan:Real estate properties.
Car, bike or any other vehicle
Stocks, mutual funds or bonds.
Gold and diamonds
Insurance policies
There are mainly three types of secured loan mentioned below:
- Mortgage
Mortgage loans are the most common type of secured loan. A mortgage loan is sanctioned on immovable property like land or house.
- Vehicle loan
considered as secured loans and if the borrower fails to repay the loan amount the lender will repossess the collateral under their control.
- Credit Card
Credit card is the smart way of getting a secured loan. If you have taken a loan against your credit card as collateral and if you fail to repay the loan amount then the lender will deduce that money from your cash deposit account.
What is unsecured LoanUnsecured loans are loans that do not require collateral for loan sanction. Under an unsecured loan the lender will investigate your income background, your credit score. These loans are considered to be at higher risk for the lender.
Types of unsecured loans- Student loan
Student loan is provided to a student who applies for student loans or grants when in need of financial support. The student is liable to repay the amount after 6-7 years from the date of completing his/her education.
- Wedding loan
A salaried person can apply for a wedding by providing the company details, offer letter, salary slip and repay the amount on monthly basis or as per the agreement between lender and borrower.
- Agricultural loan
If a farmer has a land but does not have finances to do his farming, he/she can avail agricultural loan by providing his/her Kisan khata number which will be deducted from his account.
This is all aboutwhat is secured loan and the difference between what is secured and unsecured loan in this answer. When someone questions “Is home loan a secured loan” you can say Yes and add to your sentence that comes under Mortgage.
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What is a secured loan?
Harshad Pophli
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4 Year
2021-05-19T11:21:52+00:00 2021-05-20T21:19:40+00:00Comment
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