Difference between Secured and Unsecured Loans

Loans are of 2 types one is secured and other is unsecured, in order to understand both of them better one should look at the difference between secured and unsecured loans –

  1. Security – While taking secured debt one needs to put security like land, building, plant and machinery in favor of creditor and then he or she can take the debt whereas in case of unsecured debt there is no such requirement of putting security in favor of creditor.
  2. Rate of Interest – The rate of interest which the debtor has to give to creditor is lower in case of secured debt because of the assets of borrower act as securities, while unsecured debt have higher rate of interest because they are risky as their is no asset of borrower with creditor and in order to compensate for that creditors charge higher rate of interest.
  3. Amount – In case of secured debt one can get higher amount of debt because of security whereas in case of unsecured debt amount is lower as lenders are unwilling to risk too much amount without having the security.
  4. Ease – A secured loan is much easier to get as you have the assets which can you can give to the lender and get the loan while unsecured loans are very difficult to get as creditors put stringent measures before giving the debt.
  5. Example – Examples of secured loans are car and home loan, while examples of unsecured loans are credit card, bank overdraft and personal loan.
0 comments… add one

Leave a Comment

Related pages

dividend defadvantages and disadvantages of gold standardcrossed chequesfdi advantages and disadvantageswhat is a derivative marketdeferred revenue expendituredemerits of globalizationfactoring vs discountingwhat is a autocratic leaderproduct bundle pricing definitioncreditors turnover ratiohorizontal analysis accountingfdi & fiidisadvantages of debenturesunqualified report auditdisadvantages of borrowing moneyaccounting concepts consistencyadvantages of barter systemadvantages and disadvantages of mergers and takeoversexample of inferior goods in economicswhat is mixed economy advantages and disadvantagesadvantages of autocracy governmentfull form of rtgs in bankingdifference between freight and cartageadvantages of debit cardsdisadvantages of marketing segmentationnon diversifiable risk examplerental income journal entryloans advantages and disadvantagesmonopolistic characteristicscharacteristics of authoritarian leadership styleadvantages of privatizationtraditional economy definition and examplessyndicated loan examplemarket skimming pricing exampleswhat is full form of micrbackward integration strategy examplesconglomerate diversification definitionexample of upsellingbenefits of autocracyunearned revenue accounthow to comment on profitability ratiosfull form of cibil in bankingdefine consignee and consignoradvantages and disadvantages of sales promotionbenefits of payback periodwhat is substitution effect and income effectdirect and indirect quotationadvantages and disadvantages of hire purchaseadvantages of venture capital financingsocial networking advantages and disadvantagesdefine monopolistic competitionwhat is vertical mergerhypoticationjournal entry of outstanding expensesjit advantagesfifo method advantagesstocks advantages and disadvantagessubstitutes and complements in economicsadvantages and disadvantages of inventory managementmixed capitalism definitionwhat does a crossed cheque meanwhat is direct quotation and indirect quotationwhat is income effect and substitution effectcomplentary goodsredeemable preference shares definitiontypes of cheque crossingexplain liquidity ratiowhat are the characteristics of monopolistic competitionadvantages and disadvantages of jitdvr abbreviation meaninghow do we complete a horizontal and vertical analysissocialism disadvantagesconglomerate company examplesadvantages and disadvantages of equity sharesunearned revenue examplesdefinition of accrued income