In finance, secured debt refers to any form of debt, even if secured by collateral, that is either not insured by collateral, or secured by an asset in the event of a bankruptcy or non-payment of loan, including some types of loans secured by houses, cars and other property. While all kinds of loans are secured by something that may be lost or destroyed in a lawsuit or default, there are specific types of unsecured loans. The types are as follows:
Unsecured personal loans are considered to be the easiest to obtain because they involve very little documentation, and do not require collateral. Unsecured credit card debts such as balance transfers are not necessarily secured by any kind of asset or collateral. Unsecured personal loans are also offered to those who have credit problems such as late payments or defaults. It is important to remember that unsecured personal loans are usually higher in interest rates than secured loans.
This kind of loan has more risks for lenders, since it involves the risk that if the borrower fails to make the loan payment, the lender will lose their capital. Because of this potential loss, many lenders do not grant unsecured credit cards to people with bad credit, unless they have some savings in which to place as collateral. Another factor that can decrease the amount of unsecured personal loans offered to people with bad credit is the higher fees charged by unsecured lenders.
Those who have a checking or savings account but do not have a checking or savings account will usually find that unsecured loans are easier to get. Because unsecured loans are not collateralized, there is no risk for the lender to lose their investment if the loan is defaulted on. Some unsecured personal loans even require collateral, although most lenders charge much higher interest rates for this type of loan.
Collateral is necessary for loans that require collateral to be granted, so people with poor credit must consider collateralizing their loans. Collateralizing allows you to get a loan with almost no paperwork. You need to deposit a certain amount of money as collateral in order to receive an unsecured loan.
Collateral can consist of anything that you own, such as a car, home, boat, airplane or even jewelry. The amount of money that you use as collateral is determined by the lender, and can vary from one lender to another. Collateral can even be as high as one hundred percent of the value of your asset, although this would be considered very high. Since lenders are willing to lend very high amounts of money without any risk at all, many times, they are willing to give up more than one hundred percent of your worth.
Car loans are not necessarily secured against the car itself. Instead, many lenders require you to pay extra if you buy your car from them as opposed to someone else. This practice is known as secured financing. If you take out a personal loan to purchase a car, you do not have to put any money down and no collateral is involved. If you want to get an unsecured loan to buy another car, however, you will have to place some amount of money down on your vehicle and then pay a higher interest rate.
The amount of time it takes to get approved for unsecured loans depends on the type of lender that you go with. Even though the process for getting unsecured loans is typically less difficult than secured loans, the process may take several weeks. to get the money when you apply online. Most private lenders require at least six months to get approved. If you cannot wait that long, you can always use a broker to help expedite your application process.