Know Secured Vs. 4 Things to Know About These Loan

Updated on: 18 Jul 2024

Knowing the differences between secured loans and unsecured loans is crucial to help you choose the right lending option for a sudden monetary exigency. While both these loans have pros and cons, selecting one may be overwhelming due to the availability of multiple loan options.

Read on to learn what is a secured loan and an unsecured loan and four essential things to know when choosing between them.

Four Essential Parameters to Choose Between Secured vs Unsecured Loans

Here are four salient features to help you select between secured and unsecured loans:

1. Need for Collateral

Secured loans require you to pledge your valuable assets as collateral. This is an ideal option if you have a low credit score or are new to credit. On the contrary, lenders disburse unsecured loans without collateral, provided you are a salaried professional with a spotless credit history.

2. Processing Speed

Secured loans involve lengthy processing time due to the extensive documentation involved. Short-term secured loans are usually not available.

With the unsecured option, you can even avail of online loans for a shorter duration immediately. You can get these loans at affordable interest to meet various short-term needs like relocation, marriage, house renovation, etc.

3. Risk of Losing the Collateral Pledged

In the case of secured loans, you may have to forgo your claim on the valuable mortgaged with the lender if you fail to comply with the terms of repayment. Low-interest rates may seem appealing for a longer duration, but the potential of losing your collateral is high.

In the case of unsecured loans, you can enjoy complete peace of mind as you stand to lose nothing valuable. Interest rates may be slightly higher, but they offer unparalleled flexibility in repayment.

4. Variation in Loan Amount Payable

In the case of secured loans with a variable interest rate, your monthly instalments depend on the volatility of the economy and you may end up paying more. The possibility of interest rates going up, in the long run, is high.

With unsecured loans, you don’t have to pay even a buck more as the loan repayment instalment and tenure remain fixed.

Secured vs Unsecured Loans: Key Differences

Here are some of the key differences between secured and unsecured forms of credit:

	Secured Loans	Unsecured Loans
1	Fluctuating loan repayment EMIs if the interest rates are variable	Fixed instalments
2	Available for medium to long-term	Can be availed of for exceptionally short period
3	Lower interest rates	Slightly higher interest rates
4	Collateral is a must	No need to pledge any valuable
5	Extended processing period	Negligible processing time
6	Offered by banks and other institutions	Online loans from non-banking financial companies are available
7	A larger value of the loan has to be availed of	Small loans can be easily secured

Why Opt for Unsecured Loans at Fibe?

Fibe has been instrumental in changing the dynamics of unsecured loans with its readiness to help out professionals with easy and swift monetary assistance. Small loans with no collateral are now available within your reach, even if your creditworthiness does not measure up to market stipulations.

With the Fibe Instant Personal Loan, you can get up to ₹5 lakhs in just a few minutes without any lengthy paperwork. Affordable interest rates, quick disbursal and no collateral required are a few benefits you get to enjoy. So, download the Fibe Personal Loan App on your smartphone and apply now!

FAQs on Secured and Unsecured Loans

What is the difference between a secured and unsecured loan?

When comparing secured loans vs unsecured loans, you must know that the former requires a valuable asset as collateral and has a lower interest rate. On the contrary, unsecured loans do not require collateral and have higher interest rates.

What is an example of a secured and unsecured credit?

Home and car loans are two types of secured loans where the home and car act as collateral, respectively. Personal loans are examples of unsecured loans.

Is a student loan secured or unsecured?

Financial institutions offer secured or unsecured education loans, depending on whether you need to pledge any security. Generally, lenders require collateral if you apply for a longer tenure or a higher loan amount.