Loan Calculator: Consumer Loans, Secure And Unsecured Loans
What are the types of Consumer loans?
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In a secure loan, the borrower grants his assets as collateral. It is put before the consumer is granted a loan.
The lender who issues the loan. He owns possession of the asset given by the borrower. The lender can take over it if the borrower fails to pay the loan off.
In simple terms, any default on a Secured Loan gives the lender the legal opportunity to seize the asset used as collateral. Some examples of secure loans are mortgage and auto loans. In these types of loans, the lender holds the deals. It means the owner is in the owner's name until the borrower pays or clears off the loan. Suppose there is any default in mortgage loans. However, it results in the bank foreclosing the home or the asset in terms of a car. It can mean the lender can repossess the car.
Lenders usually think before giving out much money without a guarantee. Secure loans reduce the risk of the borrower defaulting because it risks collateral or assets. Suppose the collateral or asset value is less than the debt. The borrower is still liable for the remaining amount of the debt.
The best part about secured loans is that there is a high chance of approval compared to unsecured Loans. It is also better for an unsecured Loan option which may not get approved.
It is a loan in which there is no collateral involved. But in this, the lender has to verify the financial guarantee by the borrower. It can be attained through five c of the credit. It is a common method lenders use to gauge the potential borrower's credit.
What are the five important C’s in Unsecure loans?
The Five C are listed below.
Character: it involves the credit history of the borrower. Hence it can determine the borrower's ability to pay the debt in the past.
Capacity: it calculates a borrower's capacity to repay the loan. It can be measured by comparing the debt to the borrower's income.
Capital: It is the asset apart from the loan the borrower has, apart from the income it is used to fulfill a debt obligation.
Collateral: It is only used in Secured loans. But it can be used as security t repay the loan.
Condition: it is the type of lending capacity that runs in the market and the purpose of the loan. Unsecured loans
usually have a higher interest rate and low borrowing limits. It has a shorter duration to repay the loan. The lender often assigns a co-signer as a guarantee that the borrower claims to pay the loan timely. It is, however, in terms of very risky payments.
Suppose the borrower fails to repay the unsecured loans. The lender can hire an agency that collects the loan amount. These agencies recover past finds that are not cleared for any reason.
The Loan Calculator will Calculate the monthly amount for Secure and Unsecured loans.