Types of Loan - Secured and Unsecured

There are two types of loans, namely, secured and unsecured loans.

Secured loan

Secured loans are loans, which have collateral, attached to them in the form of a lien. A lien is a legal claim on one's property till a debt secured by the property is paid off. In other words, a lien gives the right to claim a person's property if an obligation is not discharged. A mortgage loan that is a loan secured by your house involves a lien. The mortgage company holds a lien on the property as a security for the repayment of the debt. Mortgages including first and second mortgages (home equity loan and home equity line of credit) and car loans are examples of secured loans. Secured loans are not negotiable in any way. Get free consultation to deal with secured loans. Get free consultation to deal with secured loans.

Unsecured loan

Unsecured loans allow you to obtain services or goods on credit in exchange for your verbal or written commitment to pay the creditor back. These loans are not secured by collateral. Such loans involve medical bills, credit cards, commercial loans, consumer debt and personal loans. In case you fail to pay off these debts, the only way left out for a lender is to take legal action. Calculate your total debt using the debt calculation form and start off to overcome your debt burdens. Debt consolidation is applicable only with unsecured loans.

In case you borrow $100 from someone and are unable to pay back it is advisable that you go for debt consolidation. The debt consultant can negotiate with the creditor to eliminate the late fees and taxes, which have been added to $100 because you could not satisfy the repayment obligations. In most cases, the creditor agrees since he has not many options left. Sometimes he even reduces the principal amount. A creditor can approach the court with the matter. But this means additional money and a lot of hassles. Therefore, it is better to allow a debtor repay his debt through debt consolidation. Through proper negotiation with the help of a debt consultant, you may find that you just have to pay $60 in order to be debt free. However, this depends on how good a rapport you have with the creditor.

Last Updated on: Thu, 30 Jun 2016