Looking at the evolution of the financial industry, it's amazing to see how much we've advanced compared to about 15-20 years ago. back then, getting a loan was quite a tedious affair. Even if you disregard the documentation requirements, you had to show up at the bank in person at every step of the process until your application was eventually approved and the money deposited into your account. Things moved quite faster if what you wanted was a secured loan, but there was no getting around going to a brick-and-mortar branch.
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.
Secured loans have a lot of critics. After all, they say, why borrow money that is already mine and have to pay interest on top of it? While they do have a point, there's more than one occasion where this way of thinking actually misses the big picture. Consider these three scenarios.
1. Your credit is bad. If you happen to have bad credit, you know first-hand how hard it can be to get a loan. Actually, it might not be that hard, but the interest rates that you will be charged are just sky-high. If you have a little bit of savings, secured loans can help you in two ways: you get better interest rates thanks to your collateral that makes your credit history irrelevant; and by repaying the loan on time, you get to rebuild your credit.
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 to face an emergency. Having to get a secured loan doesn't always revolve around your credit situation. Everything might be fine and dandy in that department and then you have to pay for medical expenses or some similar type of emergency. If you have an emergency savings fund, getting it down to zero is probably not a good idea. Similarly, if you have a CD, cashing it out is expensive because the bank will charge you months of interest for doing so before term. Borrowing against those funds you already have might be the smarter (and financially sounder) decision, because not only will you get good interest rates, you'll also get to keep your savings which will continue to earn interest.
Obviously, secured loans serve a purpose. And since they're offered by lenders, it's obvious that they fill a need. The biggest knock against them is their very nature: you have to have the money in order to benefit from their advantages. Besides that consideration, they're absolutely great to have as an option, since there's a lot you can benefit from (and improve) by tapping into them. - 15432
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.
Secured loans have a lot of critics. After all, they say, why borrow money that is already mine and have to pay interest on top of it? While they do have a point, there's more than one occasion where this way of thinking actually misses the big picture. Consider these three scenarios.
1. Your credit is bad. If you happen to have bad credit, you know first-hand how hard it can be to get a loan. Actually, it might not be that hard, but the interest rates that you will be charged are just sky-high. If you have a little bit of savings, secured loans can help you in two ways: you get better interest rates thanks to your collateral that makes your credit history irrelevant; and by repaying the loan on time, you get to rebuild your credit.
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 to face an emergency. Having to get a secured loan doesn't always revolve around your credit situation. Everything might be fine and dandy in that department and then you have to pay for medical expenses or some similar type of emergency. If you have an emergency savings fund, getting it down to zero is probably not a good idea. Similarly, if you have a CD, cashing it out is expensive because the bank will charge you months of interest for doing so before term. Borrowing against those funds you already have might be the smarter (and financially sounder) decision, because not only will you get good interest rates, you'll also get to keep your savings which will continue to earn interest.
Obviously, secured loans serve a purpose. And since they're offered by lenders, it's obvious that they fill a need. The biggest knock against them is their very nature: you have to have the money in order to benefit from their advantages. Besides that consideration, they're absolutely great to have as an option, since there's a lot you can benefit from (and improve) by tapping into them. - 15432
About the Author:
Jeremy Beckwith is an expert on the cd secured loan. Get valuable financial information by visiting his financial blog.