Secured vs Unsecured Loans In Singapore Explained
Knowing the difference between secured and unsecured loans in Singapore is essential when taking out a loan. This will enable you to make the right borrowing decision.
Knowing what the loan will do for you if you are taking a loan will enable you to select the most appropriate one.
Therefore, this article will explain the difference between secured and unsecured loans so that you can make the right decision.
What are Secured Loans?
A secured personal loan is a type of loan in which the lender holds something as security, usually your property. If you do not repay the loan, the lender can seize the security and recover what they owe.
Traditional examples of security for secured loans are cars, homes, and even fixed deposit loans. Since the loans are secured by collateral, they are safer and tend to be lower in cost as interest. Also, the borrower is provided with favorable payment terms. Therefore, secured loans are preferable if you want to borrow a massive amount or require some extra time to repay.
Notably, the only negative aspect of these loans is that you stand to lose your property to the lender if you do not pay back. Therefore, when applying for a secured loan, ask yourself whether you would rather risk losing your property.
What Are Unsecured Loans in Singapore?
Unsecured loans never require you to provide something as a collateral for the loan. Thus, since they are risky, the lenders use your previous earnings, income, and credit history as basics to gauge your creditworthiness. Importantly, as there is no security for the loan, the lender is taking a risk lending to you. Therefore, in most instances, this risk is shifted in the form of a decrease in tenure. Additionally, the borrower is taxed with outrageous rates of interest.
Some examples of unsecured credit include personal loans for emergency needs. The loans are easily accessible and can be used to finance short-term expenditures. More significantly, you do not lose a valuable asset when you cannot repay the loan.
It’s also worth noting that unsecured loans do carry risks. If you cannot repay these loans, it can ruin your credit report. Also, you will never be able to get a loan unless you work on your overall qualifications. Being aware of this will help you when you decide to borrow.
Which One to Choose
Whether to apply for a secured or unsecured loan, the choice depends on your circumstances. A secured loan may be the right choice if you need a substantial amount of money and have assets to use as security.
But if you borrow money for minor emergencies or don’t want to use your asset as security, opt for unsecured loans.
Things Remember When Borrowing
Before you borrow the money, please perform some calculations and ensure that it is a loan that you need. Also, ensure you are eligible for the loan and can repay it within the provided time.
So, determine how much you wish to borrow and how much you will pay for borrowing. If these questions are answered ahead of time, you can decide at that very moment.
Importantly, regardless of whether you require a secured or unsecured loan from licensed moneylenders, always pay attention to the interest rate charges, other fees, and the repayment period. Most importantly, always carefully read the agreement and clarify all the details before signing the loan agreement.
Conclusion
It doesn’t matter whether you’re getting an unsecured or secured loan. Simply get the one best suited to your individual needs and circumstances. They’re both great loans, so get whichever is right for you.
If you’re unsure about the type of loan to choose, remember that professional advice is always available. A licensed moneylender can assess your needs and eligibility and help you select the most suitable loan.