There are mainly two different types of loans that can be issued to an individual by a bank or other financial institution – secured loans and unsecured loans. Here in this article, we will explore the various differences between these two types of loans.
The secured loans are those that are secured by a collateral or an asset of some kind. The purchased items such as a car or a home can serve as a collateral. A lien is put on such items. The bank or the financial company will hold the title or deed until the total amount of the loan has been repaid back along with all applicable fees and interests. Other items like bonds, stocks or personal property items can also be used for securing a loan.
Secured loans are by far the best way to get large sums of money as loans. Unless there is some sort of solid guarantee, a lender will be highly unlikely to loan out a large sum of money simply at the word of the mouth of an individual that the sum will be repaid. On the other hand, putting a car, a home or some other kind of property on the line is a good way to guarantee that a person will do everything that is possible to get the loan repaid within time. Some of the most common forms of secured loans are mortgage or home loans, construction loans, bridging loans, term loans and car loans.
Unsecured loans are those that do not involve a guarantee of payment or collateral like the ones commonly associated with secured loans. Some of the common forms of unsecured loans include credit card purchases, personal (signature) loans, student loans, certain home improvement loans and personal lines of credit. As the lenders take a considerable risk by making such loans without any assets or property to recover if there is a default, the interest rates for these loans are considerably higher.
When a person applies for an unsecured loan, the lender of the money believes that he or she will be able to repay it based on personal financial resources. There are five different criteria used for judging a person before an unsecured loan is approved. These include character, capital, collateral, capacity and conditions. The criteria character, capital, collateral, capacity is used to judge a person’s credit worthiness as well as the willingness to pay the loan back. Conditions relate to the situation of the borrower and various economic factors.
No matter what your requirements are, it is always better to take loans from a licensed money lender as this can get you a number of benefits. We have all heard stories of how certain people borrowing money from unauthorized sources have experienced major problems with harassment issues. By getting your money from legally approved money lenders, you ensure from the beginning that you are free from such troubles. So let’s have a look at the various benefits that you can get by loaning money from licensed money lenders.
1) Avoiding Harassments from Illegitimate Money Lenders
Borrowing money from licensed money lenders protect you from the harassments that illegitimate money lenders can expose you to. The money lenders in Singapore have to follow numerous strict money lending laws that are laid by the government. If the lenders are not able to abide by even a single of them, then they become liable to face serious punishments from the governmental authorities such as monetary fines or even revoking of the lender’s license. The professional licensed money lenders can offer you advice on how to stick to a repayment scheme that is feasible so that this helps you to manage your money properly.
2) Avoiding Very High Interest Rates
Usually, unlicensed money lenders ask for very high interest rates as they often have a need to ensure repayments from the people borrowing money from them. However, licensed money lenders in Singapore are registered under the “Registrar of Moneylenders”, that issue dictates regarding how much a money lender can charge as interest rates, what fees they can ask for and the maximum amounts that they can lend to the people asking for loans.
By the way, i-Credit offers one of the lowest interest rate in Singapore, compare to most licensed moneylender in Singapore.
3) Avoiding SMS Spams from the Illegal Money Lenders who try to convince you to Loan Money from Them
The licensed money lenders are not authorized by the law to send advertisements through SMSs or carry out telemarketing campaigns to entice potential customers. If you are bothered by such SMSs asking you to loan money, then you can report this to the IPT as this is a major violation of the DNC act and money lenders act.
4) Avoiding Illegal Ways of People Trying to Obtain Your Personal Information
Illegal money lenders often make use of a person’s SingPass login details for obtaining personal information about people who they try and can convert into customers. Private information if fallen into wrong hands can be used in wrong manner. Hence the legal lenders only carry out SingPass verification checks in the presence of the person in question as he or she is obtaining a loan in the office. The money lenders check your previously drawn salary so as to estimate your level of income before they can actually issue the loan on your name.
5) You can get your Loans Easily with Legitimate Money Lenders
Legitimate money lenders, unlike the illegitimate ones can issue your loans rather quickly. For example, if your yearly income is $30000 or more, then you can get your loan approved quite easily and in less time. Moreover, your credit history won’t be checked thoroughly or taken too much into consideration.
6) You can Loan ANY Amount For Any Income Group
If your annual income is more than $30000, then you can loan money up to 4 times of what is your monthly income. Moreover, the interest rates that will be applicable for you will be at 4% monthly. Check out the loan scheme for more info.