A secured loan is a loan that is covered by a certain asset. A mortgage is an example of a secured loan since the loan is secured against the house. Guaranteed loans are sought by lenders since, in the case of a default by the borrower, the lender is protected by the assets that the borrower made available to the lender initial. On the other hand, an unsecured loan is a loan that is not protected or secured by an asset. In this case, the lender takes a bigger risk and will probably require a higher interest rate. More than the loan is risky, more than that will be more expensive in the end.
In general, secured loans are not large loans. Large loans usually take the form of a mortgage or home equity loan when they are fixed. An unsecured loan can range from $ 250 – $ 10,000 depending on various factors, namely your income, your credit history, and your full debt.
Who offers unsecured loans?
In Canada, unsecured loans are not offered by banks.
If you need an unsecured loan, you will have to find a private source. Private lenders are actually very scarce and scattered across the country, so most unsecured or private lending transactions take place locally, with a local lender.
Types of Unsecured Loans
At a very basic level, the only types of unsecured loans available to you are:
A payday loan is a loan that is automatically repaid on your payday- payday right now. A payment is directly withdrawn from your bank account. This type of loan comes with high rates and fees, especially if you miss payments.
Unsecured private loans
An unsecured private loan is much more tame, with more reasonable rates. However, there are more stringent requirements for approval for a private loan, since the repayment method is not automated.
For unsecured loans, the only option you have is to borrow from a friend or family member.
Eligibility for an unsecured loan can be difficult; we advise you to bring and apply through a specialist loan.