Secured and Unsecured Loans

What is a cash secured loan

Most of you already know that loans divide in two major categories: secured and unsecured loans. However, many don’t know that there are a variety of ways to secure a loan, in those situations where your credit score does not allow you to obtain an unsecured loan. Let’s take for example the cash secured loan. A cash secured loan is a loan where you use a cash-based collateral, such as certificates of deposit or savings accounts in order to reduce the lender’s risks. Some call them savings secured loans, and this happens because they allow the borrower to obtain the money he needs while he still earns the interest on the savings account (collateral).

The best feature of a secured cash loan is the interest rate. In other loans, the banks are taking greater risks and thus charge higher interest rates. But with cash secured loans, interest rates can be as low as 2 or 3% over the interest that is earned on the cash reserve used as a collateral. Usually, these loans have a short repayment period.

Cash secured loans are very useful to business customers who need money to keep their activity running – purchase inventory, buy supplies, payroll and others. Their cash reserves will be used for security. Also, this type of loan can be used successfully to repair a damaged credit, if payments are made on time. Business customers can benefit from larger amounts. But for the individual borrower these large sums are not available. This is obvious, since he does not have a monthly massive income generated by sales of goods or services, like a business does.

How to get a secured cash loan

• Calculate the amount of money you need; now evaluate your collateral options and then compare values.
• Next step will be to find cash loan companies that offer these products. Different types of lenders to consider are: credit unions, banks, private lending institutions. You can look either online or in the yellow pages.
• In the end, fill out the application forms. Typically, the application process will involve credit checking, statement of purpose and background check. For best results, it’s advised to clean up any possible credit issues and ensure that the collateral covers the bank’s requirements.

This entry was posted on Thursday, June 24th, 2010 at 2:00 pm and is filed under Secured loans. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.