Three Things You Need to Know about Secured Loans

Understanding the ins and outs of the financial world can be tricky, even for a professional economist. The details regarding secured loans, which make up nearly half of all the money borrowed in the world, can make consumers and business owners very confused. To make matters worse, the educational information needed is so spread out that the average person cannot find what they need.

As such, the following are three things you need to know about secured loans:

1. What Is Collateral?

With secured loans, applicants will be required to present some form of collateral before the underwriter will accept the terms of the agreement. Typically, that collateral comes in the form of a piece of valuable property such as a house, a car or a recreational vehicle. However, as long as the value of the collateral is sufficient enough to satisfy the lender, it really doesn’t matter what it is.

2. How Does Your Credit Score Affect Secured Loan Approval Rates?

Applying for a secured loan with enough collateral to please the lender is only half the battle. Your credit score will also play a huge role in the outcome of the underwriting process. Because most creditors only want to lend money to applicants who present as the slightest liability, coming to the table with a low credit score can make getting a secured loan impossible.

It works like this: Your credit score is calculated based on several factors and is an amalgamation of three separate numbers from the three major credit reporting agencies – Experian, Equifax, and TransUnion. If one or more of those bureaus find fault in your report, your scores will diminish respectively. If your scores drop too far, lenders will probably view you as too much of a risk and deny your secured loan applications.

3. Can a Middle Man Help Me Get Approved for Secured Loans?

Depending on several factors, some financial services companies can usher you through the door towards better financing options, including secured loans. With the right kind of help and a service contract that doesn’t put you at risk, funding proportionate to your borrowing ability can be found and obtained. However, it’s important to be extremely careful about who you work with.

Some credit help agencies ask for upfront fees, while others only charge commission if you get approved for a loan. Generally, the “success fees” are based on a percentage of the monies borrowed. On the other hand, both types of assistance can put you in line with creditors you might not have considered otherwise. Either way, it’s crucial to remember the Golden Rule: Confidentiality is key and you never have to agree to anything you’re not comfortable with.

The Final Word

Using unsecured loans to fund your dreams is a good idea if you know how to use them properly. Depending on your current credit situation and the source through which you get funding, the terms of an unsecured loan can be rather agreeable with your budget too.