When A Secured Loan Makes Sense
Looking at the evolution of the financial industry, it's amazing to see how much we've advanced compared to about 15-20 years ago. back then, getting a loan was quite a tedious affair. Even if you disregard the documentation requirements, you had to show up at the bank in person at every step of the process until your application was eventually approved and the money deposited into your account. Things moved quite faster if what you wanted was a secured loan, but there was no getting around going to a brick-and-mortar branch.
Today, the Internet gives you the option of getting your secured loan online, with just a few clicks of your mouse. Since the loan is secured, that means that a lot of the information that you'd normally be required to provide about yourself is no longer necessary: you have a liquid asset that you give to the bank as a security, and allow them to "realize" that asset should you default on your loan.
All you actually need to provide is basic details about you, your job, and submit yourself to a security verification. The most important part of the transaction is providing the documents that state that the collateral is yours and is authentic, to make sure that the financial institution that's granting you the loan will actually be able to take possession of that asset if you don't pay for your loan in a timely fashion.
Some people are fervent critics of secured loans. They point out that it's foolish to borrow money against funds that are already yours, and that you could have used interest-free, as opposed to having to pay interest on that secured loan. While the argument might look iron-clad, there are a couple of circumstances where it no longer holds up that well. Here are a few of them.
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
2. Your credit file is thin. Some options (such as PRBC) have been made available to people with thin credit files. The term thin credit file is used to designate people whose credit file is either completely empty of contains very little information. In those situations, credit bureaus are unable to assign them a credit score, and lenders are unwilling to do business with them because they have no credit history. If that's your situation, it could be wise for you to get a secured loan and start paying it off, so that your installment payments start showing up on your credit file to start building that credit history.
3. You have an emergency. Sometimes it's not even about your credit. You might have good credit and everything but you're suddenly faced with unplanned and urgent expenses that you must meet. It might feel uncomfortable depleting your emergency savings fund. You might also not want to cash out a CD and forfeit months of interest. In those cases, you can borrow against those funds and pay off the loan over time as your money continues to earn interest.
As you can see, secured loans do have their uses. They're easy to get. They're equally quick to get disbursed. They carry low interest rates. And they can help improve your financial situation. In the end, they're a very good financial too to have at your disposal.
Today, the Internet gives you the option of getting your secured loan online, with just a few clicks of your mouse. Since the loan is secured, that means that a lot of the information that you'd normally be required to provide about yourself is no longer necessary: you have a liquid asset that you give to the bank as a security, and allow them to "realize" that asset should you default on your loan.
All you actually need to provide is basic details about you, your job, and submit yourself to a security verification. The most important part of the transaction is providing the documents that state that the collateral is yours and is authentic, to make sure that the financial institution that's granting you the loan will actually be able to take possession of that asset if you don't pay for your loan in a timely fashion.
Some people are fervent critics of secured loans. They point out that it's foolish to borrow money against funds that are already yours, and that you could have used interest-free, as opposed to having to pay interest on that secured loan. While the argument might look iron-clad, there are a couple of circumstances where it no longer holds up that well. Here are a few of them.
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
2. Your credit file is thin. Some options (such as PRBC) have been made available to people with thin credit files. The term thin credit file is used to designate people whose credit file is either completely empty of contains very little information. In those situations, credit bureaus are unable to assign them a credit score, and lenders are unwilling to do business with them because they have no credit history. If that's your situation, it could be wise for you to get a secured loan and start paying it off, so that your installment payments start showing up on your credit file to start building that credit history.
3. You have an emergency. Sometimes it's not even about your credit. You might have good credit and everything but you're suddenly faced with unplanned and urgent expenses that you must meet. It might feel uncomfortable depleting your emergency savings fund. You might also not want to cash out a CD and forfeit months of interest. In those cases, you can borrow against those funds and pay off the loan over time as your money continues to earn interest.
As you can see, secured loans do have their uses. They're easy to get. They're equally quick to get disbursed. They carry low interest rates. And they can help improve your financial situation. In the end, they're a very good financial too to have at your disposal.
About the Author:
Jeremy Beckwith is an expert on the CD loan. Get great financial tips by visiting his financial blog.
posted by Debt Consolidation Loan at
1:09 PM
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