What's The Difference Between a Secured Loan vs. Unsecured Loan?
In the broad scheme of lending, you have two options available: secured loans and unsecured loans. Of course, these can be broken down into further subcategories. It is vital to know whether the loan you’re looking into is secured or unsecured because there are a few key differences between them.
Secured Loan vs. Unsecured Loan: Learn Which is Best for You
Check out our extensive breakdown below to find out which type of loan may benefit you the most in an emergency.
Secured Loans Involve Collateral
When it comes to a secured loan vs. unsecured loan, the major difference is collateral.
With a secured loan, you are borrowing against something you own. For example, a title pawn is a secured loan borrowing against your vehicle's title. With a mortgage, you are borrowing cash against the home's value.
Essentially, you are showing the lender proof that you have something that you can give them to make up the loan cost in the event of missing repayments. You do not have to do this with an unsecured loan.
Secured Loans Are Based Upon The Value Of Collateral
Because a secured loan is secured against something of value that you own, the loan value is based upon the value of that item. For example, with a secured title pawn, the amount of cash that you can borrow will be based upon an inspection of your vehicle. You cannot borrow more cash than what your vehicle is worth.
Secured Loans May Be Higher in Value
Because secured loans have that 'proof' that the lender will get their money back somehow, the amount of cash that can be loaned is often much higher. Take a mortgage, for example. Lenders offer hundreds of thousands of dollars in financing with the caveat that they will seize the property should the borrower fall behind on payments.
Secured Loans Allow for Bad Credit Lending
Here is another major difference between a secured loan vs. unsecured loan.
You often have a much easier chance of obtaining a secured loan if you have bad credit. In fact, take a title pawn, for instance. You could have a terrible credit history but still see loan approval based on your car’s value, assuming everything else seems to be in order.
The exception to this rule is an unsecured payday advance. These can be obtained with bad credit too, though other checks are carried out to ensure that this is possible. You wouldn't be able to get a traditional bank loan with bad credit, though.
Unsecured Loans Often Require Employment or A Regular Source of Income
Now, we are not saying that all secured loans will not require a source of income. You wouldn't get a mortgage without a job, for instance. However, it becomes less important for smaller loans. For example, if you got a secured title pawn from Alabama Title Loans, Inc., you wouldn't be asked about your job.
Unsecured loans, including payday loans, will require you to prove that you have a steady income. This is to demonstrate that you will have the money to repay the loan.
With Alabama Title Loans, Inc., you can always check the requirements for each of the loan types that we offer. If it says you need proof of income, then you will need to show us your latest paystub or statement of benefits so that we can make a lending decision.
Secured Title Loan and Unsecured Payday Advance: Two Options for Fast Borrowing
Here at Alabama Title Loans, Inc., we offer both secured and unsecured loans. Now that you know the differences between a secured loan vs. unsecured loan, you may start to get an idea as to the type that is right for you. Let's run you through two of the options.
Both options here will allow for bad credit inquiries, and you can receive a decision in as little as 30 minutes. The cash could be in your account the same day.
1. Secured Title Loan
A title loan (or title pawn) is a loan taken out against the value of your vehicle. To get a title pawn, you must have a lien-free title to your vehicle. With this, you can borrow between $300 and $15,000. You won't have to prove your income, nor will you need to leave the comfort of your own home since we can carry out the vehicle inspection where you live. We just need access to your vehicle and your documents.
2. Unsecured Payday Advance
An unsecured payday loan is unsecured and contingent on your income. These loans are for between $100 and $500. They are paid back on your next payday. To get a payday loan, you must show proof of income and provide a blank check from an active checking account in your name.
Inquire About Emergency Loans Today
While there are many differences when it comes to secured loan vs. unsecured loan, both can be used to cover emergency expenses. The one you choose will often be determined by your income, assets, and amount of cash that you need to borrow. Alabama Title Loans, Inc. offers title pawns and payday advances. When you’ve determined which choice is right for you, fill in the inquiry form on our website. You could access the cash you need in just a few hours.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.