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.
All you actually need to provide is basic details about you, your job, and submit yourself to a security verification. The most important part of the transaction is providing the documents that state that the collateral is yours and is authentic, to make sure that the financial institution that's granting you the loan will actually be able to take possession of that asset if you don't pay for your loan in a timely fashion.
Since you use money that you already have when you're getting a secured loan, many people think it's akin to a scam from the part of financial institutions. Their point is that the money is already yours, what's the reasoning behind getting an interest-bearing loan to get the same amount that you have in your savings? They do raise a valid point, but like many things in life, the answer is situation-specific. So when does it make sense?
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
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 urgent expenses. This article might make you think that getting a secured loan always stems from a credit situation but it's not the case. There are times in life where we have to spend large amounts of money on a very short time span. If you have emergency savings or a CD, that might involve making difficult financial decisions. Taking out ALL the money in your emergency savings account is not recommended. Neither is cashing out a CD before term because you'll lose months of interest. Your best alternative: borrow against those funds. Your emergency savings or CD will still be there, you'll get your loan at low rates, and your money will keep earning 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. - 16752
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.
All you actually need to provide is basic details about you, your job, and submit yourself to a security verification. The most important part of the transaction is providing the documents that state that the collateral is yours and is authentic, to make sure that the financial institution that's granting you the loan will actually be able to take possession of that asset if you don't pay for your loan in a timely fashion.
Since you use money that you already have when you're getting a secured loan, many people think it's akin to a scam from the part of financial institutions. Their point is that the money is already yours, what's the reasoning behind getting an interest-bearing loan to get the same amount that you have in your savings? They do raise a valid point, but like many things in life, the answer is situation-specific. So when does it make sense?
1. You have poor credit. You don't want it to remain that way for the rest of your life, and you'd like to speed up the process of rebuilding your credit. The problem is, with your bad credit, the only lenders willing to grant you a loan are charging interest rates that you're not willing to pay. If you have savings, you can borrow against them, get better interest rates, and start rebuilding your credit right then and there by paying your installments on time.
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 urgent expenses. This article might make you think that getting a secured loan always stems from a credit situation but it's not the case. There are times in life where we have to spend large amounts of money on a very short time span. If you have emergency savings or a CD, that might involve making difficult financial decisions. Taking out ALL the money in your emergency savings account is not recommended. Neither is cashing out a CD before term because you'll lose months of interest. Your best alternative: borrow against those funds. Your emergency savings or CD will still be there, you'll get your loan at low rates, and your money will keep earning 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. - 16752
About the Author:
Jeremy Beckwith is an authority on the CD loan. Get valuable financial tips by visiting his finance blog.
