Not too long ago, getting a loan was a truly cumbersome affair that involved physically going to the bank and bringing with you a good amount of documentation in order for your application to be processed and eventually approved. Even if the case of secured loans, while the approval process was considerably speedier, you still had to show up.
Today, the Internet gives you the option of getting your secured loan online, with just a few clicks of your mouse. Since the loan is secured, that means that a lot of the information that you'd normally be required to provide about yourself is no longer necessary: you have a liquid asset that you give to the bank as a security, and allow them to "realize" that asset should you default on your loan.
You will be asked to fill out a few forms, where all you'll be asked is fairly basic, general information about you and what it is that you do for a living. In the background, the lender will also run a security verification for the source of the funds you're giving as a collateral, given money laundering concerns. Besides that, the really important information will pertain to the actual collateral. You will have to prove that it is authentic (meaning that it does exist somewhere) and is yours to do as you please (including giving it as collateral for a loan). The lender will pay great attention to this because it will be their sole basis for approval.
Some people are fervent critics of secured loans. They point out that it's foolish to borrow money against funds that are already yours, and that you could have used interest-free, as opposed to having to pay interest on that secured loan. While the argument might look iron-clad, there are a couple of circumstances where it no longer holds up that well. Here are a few of them.
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
2. Your credit file is thin. Some options (such as PRBC) have been made available to people with thin credit files. The term thin credit file is used to designate people whose credit file is either completely empty of contains very little information. In those situations, credit bureaus are unable to assign them a credit score, and lenders are unwilling to do business with them because they have no credit history. If that's your situation, it could be wise for you to get a secured loan and start paying it off, so that your installment payments start showing up on your credit file to start building that credit history.
3. You have an emergency. Sometimes it's not even about your credit. You might have good credit and everything but you're suddenly faced with unplanned and urgent expenses that you must meet. It might feel uncomfortable depleting your emergency savings fund. You might also not want to cash out a CD and forfeit months of interest. In those cases, you can borrow against those funds and pay off the loan over time as your money continues to earn interest.
The biggest drawback to secured loans is that, well, in order to take advantage of them, you have to already have the money. To a lot of people, that's not an option. Besides that, they bring considerable benefits: easy approval, quick disbursement, and rock-bottom interest rates. And as a bonus, they can be used as a tool to improve your credit. - 16036
Today, the Internet gives you the option of getting your secured loan online, with just a few clicks of your mouse. Since the loan is secured, that means that a lot of the information that you'd normally be required to provide about yourself is no longer necessary: you have a liquid asset that you give to the bank as a security, and allow them to "realize" that asset should you default on your loan.
You will be asked to fill out a few forms, where all you'll be asked is fairly basic, general information about you and what it is that you do for a living. In the background, the lender will also run a security verification for the source of the funds you're giving as a collateral, given money laundering concerns. Besides that, the really important information will pertain to the actual collateral. You will have to prove that it is authentic (meaning that it does exist somewhere) and is yours to do as you please (including giving it as collateral for a loan). The lender will pay great attention to this because it will be their sole basis for approval.
Some people are fervent critics of secured loans. They point out that it's foolish to borrow money against funds that are already yours, and that you could have used interest-free, as opposed to having to pay interest on that secured loan. While the argument might look iron-clad, there are a couple of circumstances where it no longer holds up that well. Here are a few of them.
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
2. Your credit file is thin. Some options (such as PRBC) have been made available to people with thin credit files. The term thin credit file is used to designate people whose credit file is either completely empty of contains very little information. In those situations, credit bureaus are unable to assign them a credit score, and lenders are unwilling to do business with them because they have no credit history. If that's your situation, it could be wise for you to get a secured loan and start paying it off, so that your installment payments start showing up on your credit file to start building that credit history.
3. You have an emergency. Sometimes it's not even about your credit. You might have good credit and everything but you're suddenly faced with unplanned and urgent expenses that you must meet. It might feel uncomfortable depleting your emergency savings fund. You might also not want to cash out a CD and forfeit months of interest. In those cases, you can borrow against those funds and pay off the loan over time as your money continues to earn interest.
The biggest drawback to secured loans is that, well, in order to take advantage of them, you have to already have the money. To a lot of people, that's not an option. Besides that, they bring considerable benefits: easy approval, quick disbursement, and rock-bottom interest rates. And as a bonus, they can be used as a tool to improve your credit. - 16036
About the Author:
Jeremy Beckwith is an authority on the cd secured loan. Get valuable financial tips by visiting his money management blog.
