What Are Secured Loans

What Are Secured Loans

Definition Of Secured Loans :
To Define Secured Loans Let Us Consider The Following Example :

John is a lender that is willing to give Tom a loan with a value of $30,000, with an interest rate of total 15% for a period of one year, thus the total sum of this loan at the end of the year is $34,500.

Now if John give this amount to Tom, what is the thing which will guarantee that Tom will repay the sum of $34,500 to John ?

Thus, John asked Tom to guarantee that he will pay back the borrowed amount at the preconcerted deadline .

Tom said " how ?".
John as an experienced lender answered " do you have any valuable property, like a car , home , real estate ,.......etc ?".
Tom said " yes I have a real estate ".
John asked " how much is the value of your real estate ?".
Tom answered " I guess it worth from 30k to 40k".
John said " then you have to put it as a collateral against your borrowed sum ".

It is totally obvious from the previous example that secured loan is defined as a loan which is borrowed under some kind of security to guarantee that the borrower will pay back the full amount of the borrowed sum, this security is defined as a collateral, which is a property owned by the borrower. Usually collaterals are -homes, luxury cars, real estates or any other valuable property.

Benefits Of Applying To A Secured Loan :
Applying for a secured loan, will give you the opportunity to overcome all your monetary needs, you can finance your small business, pay off all your previous debts, improve your home, cover your high wedding costs, purchase a luxury car ,.......etc .

All of these things above can't be done without the help of the secured loans, any other type of loans will not give you the ability to do that, simply because the other types of loans (unsecured loans) are restricted to a small amounts of money if compared with the secured loans.

Secured Loans Three Major Benefits :
1-Low interest rate. ( because lenders consider secured loan to be a non risky loan ).
2-Long repayment periods, it can range between 25-30 years.
3-It could be as high as your home value, and this depends on your property (collateral) value.

Do And Don'ts :
There is a tricky way to offer an interest rate to the customer ( borrower ), lenders tend to give the interest rates as (I/month) because it will show as a small amount. Thus, always ask the lender to give you the interest term as (effective Interest /year) to make you able to calculate the total value of interest on the total amount of the required secured loan. After doing that, don't apply to the same lender, do a little research for more than one lender and compare between the offered (I's/Year) for the same periods of time, then apply for the lowest one.

I guess that the comparing procedure has become a simple procedure as we are converting to the virtual world of the internet, it is so simple and time saving to look for your best and suitable loan through the internet, all what you have to do is to type "secured loans offers" or "low interest secured loans" and enjoy comparing.