Before we switch over to the concept of secured loans, let’s illustrate it by means of an example. Suppose if a person decides to avail loan from the financial market, he will seek two basic characteristics in any loan that is low interest rate and flexible repayment period. Generally seen, the loan lacks one of the two characteristics and this ends in making the person hopeless. But, now there is no need to lose hope because secured loan serves for both these characteristics.
Secured loan is the product of the financial market which assists you in the times of crisis. Security placed in the secured loans makes the task easier of procuring funds from the market. The reason is that security balances the risk involved in lending an amount to the person. In other words, the collateral makes the lender play game on the safer side and if somehow the person fails to make the repayments in such case the lender can seize the security in order to realise his payment.
Financial market offers variety of secured loans as per the needs of the person. That is, if a person desire to buy a car then for him secured car loan is appropriate loan and if he wants to purchase a house, in such case secured home loan is suitable for him.
Interest rate in secured loans is determined by taking in to account equity and type of collateral placed. More the equity in the asset, more the competitive rate of interest will be offered by the lender to the person. Usually, the lender offers two types of interest either fixed or variable rate of interest. Both of them are good in their own way. Fixed rate of interest implies which remain same till the last repayment and it is not affected by external market factors. On the other hand, variable rate of interest changes with the change in external factors such market forces, base rate etc.
Secured loan can be applied either in the physical market or through online. In both the modes the person is required to locate the lenders offering secured loan. After locating, the next step is to ask for the loan quote. Loan quotes will provide an idea for the cost involved in the loan deal. Then he is required to fill an application, generally such application asks for personal and financial details. And if the lender finds application eligible for the loan, then he approves the loan amount. It is also suggested that the person must apply through online method as it saves time and effort.
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