There are basically two types of loans that banks offer to their clients.  One type is the secured loan and the other type is the unsecured loan.  In reality, only a very few bank clients will qualify for an unsecured loan.

Depending upon your current situation, you may not even qualify for a secured loan; that will depend on your collateral, your credit score, and your income and debt comparison.

Unsecure loans are just that; they are loans made to individuals or businesses by banks, these unsecure loans do not have any type of assets securing them.  Only those with the very best of credit will ever qualify for these types of loans.  There are a few exceptions; a guarantor can co-sign an unsecure loan for an individual.  The guarantor acts as a second party on the loan and is ultimately responsible for repayment if the first party fails to pay.  Still, you will find these loans generally are only given to those individuals wanting to borrow less than £25,000.  As well, the interest rates on non-secured loans are usually higher; and the terms are usually shorter.  Therefore, if a person cannot afford a large monthly payment; he or she may want to check into a secured loan.

Secured loans are generally secured by property or some type of assets.  Generally speaking, secured loans are given to those that own a home.  The assets are used as collateral; therefore, if you fail to make the monthly payments, your collateral or asset may be claimed by the creditor.

Because a secured loan does have some risk for the borrower, more often than not, the creditors look at this as incentive for repayment; therefore, interest rates are generally lower; as well, terms and lengths of the loan tend to be longer.  Persons seeking a secured loan may borrow large sums of money equal to their assets or what the bank feels is equal to their collateral.

Many times, secured loans are more accessible than unsecured loans for those with poor credit histories.  Because the loan is secured, ultimately, the collateral acts as the main factor in regards to obtaining the loan.  It’s important to remember than even though secured loans are easier to obtain than unsecured loans; one’s assets are usually at risk.  For those wanting to pay off credit card debt, which is considered an unsecured debt, you are ultimately putting up your property and turning that debt into a secured debt.  If the payments are not made on time and in full, the risk of losing one’s property or assets are highly probable.

Current financial situation, as well as your income and debt, your credit history, and your assets may help in determining which type of loan a bank will offer to you.  It’s important to weigh your options even if you do qualify for an unsecured loan.  Interest rates, terms of the loan, and ultimately monthly payment all should be considered when negotiating your secured or unsecured loan.