Secured or unsecured loans?

Choose the right one for your business!

When SMEs fall short of funds for running their business and require working capital to keep their boat afloat, the easiest way of acquiring funds is to obtain loans.

It completely depends on the businessmen which lending option would prove to be most desirable for them- small lenders, banks or NBFCs. However, there is one more crucial aspect they have to take into consideration and that is the type of loan their business demands.

Let’s understand the terms!

As the name suggests, a secured loan demands a collateral- in other words an asset or something valuable. As per the guidelines, the lender can keep this collateral in case you don’t pay up the loan as per the agreement.

On the other hand, an unsecured loan does not require any collateral. If you default, the lender cannot mortgage or hold back any of your asset.

Secured or Unsecured?

Before you take the decision of whether you want to go in for a secured or unsecured loan, you will have to take a few things into consideration.

To start with, a secured loan is easier to get as the lender is at minimum risk and din case you don’t pay the loan he has collateral to fall back on. Especially if you have a poor credit history, lenders will prefer offering you a secured loan.

An added bonus to getting a secured loan is that the rate of interest is comparatively lower. With higher borrowing limits, this can be considered as a good choice.

Repaying the loans

If you have taken an unsecured loans and you delay paying the installments, there is a high chance that you might get yourself trapped in severe debt. However, paying your secured loan is also equally important to ensure that none of your collateral is lost.

Who wins?

There is no thumb rule as  to which loan is a better selection. On the basis of their features we can point out to make it easier for you that a secured loan is definitely a better bet, even for the lenders.

We would love to know which loan you would opt for. 

Share your thoughts and views in the comment section below. 

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