Loan

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kawal

kawal (Querist)
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11 June 2011 Dear Sir,

What is difference of secured & unsecured loan?

Regards
Kawal

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 June 2011 Loan Given against any security is called Secured Loan. Loan given without any security is called unsecured loan.

When the loan is secured, you are going to give the lender a guarantee like assets. Cars, stock certificates, and the house can be used as a guarantee for the repayment of the loan. You will not turnover the asset to the lender and in fact, the asset will remain in your possession. The only time when the lender can seize it is when you are in default with the payments.

What about unsecured loans? As the term suggests, you don’t need any assets to back up the loans. The lender will simply base their judgment on your credit rating. If you have a great credit standing, you can avail of loans with better rates and terms; however, if you have a bad credit, your loans will usually carry high rates since the loan will be classified as a high risk one.

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