Secured Loans Are For Those With Poor Credit History
In economics, a loan is a lending of currency by one or more persons, firms, institutions, or other entities to another persons, firms etc. The recipient is legally liable to repay principal and interest on that loan until it is fully paid and the original loan balance repaid. In banking, loans are an example of credit. Loans to businesses and other organizations represent debt security. Banks make loans to businesses and organizations for various reasons, one of which may be expansion, start-up of new business or purchase of certain assets.
Businessmen who have put up their own business often need capital in order to expand their business. To obtain the loan they need to persuade the lender that the business has a chance of making profits. One way to do this is by providing reliable performance statistics and proper financial documentation such as income statement, balance sheet, profit and loss account, and so on.
A good credit history will also help a businessman get a loan easily. To convince a lender of a businessman’s reliability and marketability, he needs to provide proof of past earnings. A loan can only be provided if the loan-seeker is capable of fulfilling the monthly obligations. Most loans are unsecured in nature since they require no collateral to back the lender’s promise of repayment. Since loans are unsecured, the higher the interest rate on these loans is.
There are two types of secured loans – one is the home equity loan and the other is personal loan. The former is a lien against the borrower’s home while the latter is a loan for purposes of debt consolidation. Home equity loans are paid off when the borrower sells his/her house. Personal loans are paid off by taking out a loan. However, in cases of secured loans, if you fail to repay the money the lender may take your house or your car as security. The interest rate on both these loans is high.
The best option for those who need unsecured loans but do not have enough savings is to opt for a secured loans. This can either be done by borrowing money from family members or seeking a second mortgage from the lender. There are many online lenders who offer secured loans at lower interest rates. Some of them also provide instant approvals.
You can also avail of cash advances, which are similar to a secured loan. But unlike a secured loan where the property used as collateral, in a cash advance you are given money without any collateral. You are only required to have access to a bank account with a verified bank account number. These are short term loans given in small amounts. Cash advances are the easiest type of loans to get.