Often in our search for finance options, we are led into a crossroad where we have to make a choice between secured and unsecured loans. Depending on our financial situation, we will have to choose which loan is best for ourselves.Lets understand the basic crux of secured and unsecured loans.

Secured Loan: A loan backed by assets (e.g. a car or property) belonging to the borrower in order to decrease the risk assumed by the lender.
Following are the examples of the secured loans:
1.Car Loan                                       2. Home Loan
3.Loan Against Property                 4.Car Overdraft
5.Secured Business Loan

Unsecured Loan:With this type of loan, you do not need to put your collateral against the loan.
Following are the examples of the unsecured loans:
1.Personal Loans                             
2.Unsecured Business Loan loans                           3.Credit Card                              
4.Bank Overdraft                              

Thus, secured loan applicants have greater financial flexibility and more savings options than unsecured borrowers. Unsecured personal loans are better for those people who are in a need of instant financial assistance as these loans have a minimal paper work with quick approval process.

Now lets understand how to make the choice between the two!
Answer the following questions:
1.Which type of loan I should opt for?
2.Which type of loan will save me rate of interest?
3.Do I have any asset to mortgage?
4.For how much duration do I need the credit?
5.What is the end use of the finance I need? Is it commercial or personal?

Example: Suppose you need loan for your business. In that case, which loan you should go for Secured Business loan /Unsecured Business Loan/ Mortgage Loan?
If you have any asset to pledge then you should make a choice between secured business loan and mortgage loan.
And then you should compare on the following aspects:
1. Loan amount                                2. Rate of interest
3. End Use                                        4. Tenor

Before going any further and making any concrete decision you should be familiar to all the aspects of the both the type of loans. It all begins from choosing a suitable lender and deciding a fixed rate of interest, which you can repay comfortably. Read the complete article