An unsecured loan is issued and approved only based upon a borrower’s creditworthiness rather than any type of collateral.
At TFC Title Loans, we often get the query “what is an unsecured loan?” Loans can be confusing at times because there are so many different types which all serve varying purposes. With our twenty-five years in the lending industry, we have surmised that financial education is of extreme importance which is why we have made it a priority of ours to create resources for our customers to answer all their finance-related questions. Many lenders don’t believe it is necessary to inform their customers; however, we feel differently here at TFC Title Loans. Ever since we first opened our doors in 1994, we have been immensely passionate about friendly customer service.
We have created this informational article to answer questions concerning the differences between secured loans and unsecured loans. They are both viable options but one kind may be more beneficial than another based on your particular situation. So, if you would like to learn more then please continue reading. If you do decide, after reading the definitions of both secured and unsecured loans, that you would like to obtain a secured title loan from us then fill out our online application or give us a call today!
An unsecured loan is issued and approved only based upon a borrower’s creditworthiness rather than any type of collateral. It is obtained without any use of property to dictate the amount able to be lent out. Unsecured loans are also known as signature loans or personal loans and some popular examples of unsecured loans include credit cards, student loans, and personal loans. The borrowers are required to have higher credit ratings to be approved for unsecured loans since these loans cause higher risks for the lenders since there is no collateral back-up if the borrower was to default. If you don’t have a high credit score than you will have substantially higher interest rates than you might have with a secured loan. If you default on an unsecured loan, then you could be taken to court since there is no collateral to be used to make up the difference on the leftover balance.
This type of loan is given on the basis of the belief that you will be able to pay off the loan completely because of your financial resources; therefore, you will be judged by the five aspects of credit: character, capacity, capital, collateral, and conditions. There are generally two types of unsecured loans: revolving and term loans. An example of a revolving unsecured loan would be a credit card where you borrow some- pay it off- borrow some- pay it off. An example of a term unsecured loan would be student loans where you pay in scheduled installments over a set period of time.
A secured loan is backed by a valuable asset that you legally own like a house or a car. That asset acts as collateral for the loan so that the lender is not taking a big financial risk by lending to you. Since there is an asset used as collateral, your credit score does not play as heavily into the approval process but the score can still affect the interest rates. However, both unsecured and secured loans report your payment activity and history so your credit can be improved by making payments on time no matter which loan you obtain.
Many people choose secured loans because their credit history and current score won’t allow them to get approval for an unsecured loan. Lenders have substantially less risk when there is collateral involved so they can give you better interest rates depending on your circumstances. Secured loans are a great tool to help you repair your credit so that you can obtain unsecured loans in the future.
A car title loan through TFC Title Loans can be excellent secured loan option for you to start repairing your credit so you can have the ability to explore all your loan options in the future. A title loan uses your car as collateral for a loan but you don’t have to sacrifice your car during the life of the loan. We simply sign onto the title of your vehicle as the lienholder and you can go on driving it as you make the scheduled monthly payments. Your credit does not determine whether you qualify. We only check your credit score to make sure you are not in active bankruptcy or in credit counseling. Your ability to qualify is based solely on the current street value of your vehicle and capability to repay the loan.
If, after reading this, you are left with any questions regarding secured loans versus unsecured loans then give us a call and we would be happy to answer all of them. However, if you are ready to get started with your title loan application then fill out the online form or give us a call today!