There is a lot of difference between secured and unsecured loan. When looking for finances, make sure to choose which type suits your needs.
Secured loans are attached with collateral, something valuable like a property or automobile or you can use other financial assets. They are easier to get because they are less risky. If the borrower unable to pay back loan the lender have the right to take possession of your collateral, to recover his money. But it is risky for the borrower. A car loan and mortgage are examples of secured loan. Business loans can be both type secured and unsecured, as per requirement.
The unsecured loan does not require collateral for the approval of loan. It only need your signature and promise to pay back. But if you fail to return money, your asset is safe. But whenever you fail to repay, your credit suffers and lender can take legal action against you to recoup some or all his money. Credit card, student loan, personal loan and co-signer loan are examples of unsecured loan options.
The secured loan isprotected by collateral and have low interest rates. The borrower can get big finances easily as collateral is present and can use more money for his need.
Someone with bad credit score or need to rebuild credit, will be considered eligible for secured loan than unsecured loan.
Many times consumer does not want to or cannot pledge his assets to get business loan. They prefer unsecured business loans as their business is successful and thriving. But even with secured business loans, it is possible to damage your credit if you fail to pay back the loan. The small business ownerwill take over your collateral and if your asset is not enough to cover your loan payment, your loan amount is still due. When thathappens you not only lose your valuable asset, damage your credit and still owe money to business lenders. This happens mostly due to mismanagement and deficiency judgment.
The small business consumer must show his cash flow analysis and discuss it in detail to satisfy the business lender that you will be able to pay back loan plus the interest regularly through the loan period. The amount of interest is charged according to the amount and borrowing period.
You can use business loan for all purpose business finances. You can use it for startup financing of your new business or use the loan money to purchase new franchise, equipment, warehouse or to make advance payments of products.
There is alternative lending for unsecured loan, for example, merchant cash advance and business line of credit. Business line of credit is very useful and flexible, to give access to the funds used at your convenience and specific needs. The excellent feature of line of credit is that you only pay for what you use.
If you have difficulty in paying off your debt on time and need help. There is a nonprofit organization, American consumer credit counseling, provide access to their credit counsels. These credit counsels help you to manage your money and pay off your debt.