Secured vs. Unsecured Loan
Differentiates loans backed by collateral from those based on creditworthiness alone.
Detailed Description
Secured vs. Unsecured Loan
What is the main distinction between secured and unsecured loans?
The main distinction lies in collateral; secured loans require collateral, while unsecured loans do not.
What are some common examples of secured loans?
Common examples of secured loans include mortgages and auto loans.
Why do secured loans typically have lower interest rates?
Secured loans have lower interest rates due to reduced risk for lenders, as they have collateral to fall back on.
What factors affect eligibility for unsecured loans?
Eligibility for unsecured loans is primarily based on the borrower’s credit score, income, and debt-to-income ratio.
How can secured loans impact a borrower's credit score?
Timely repayments on secured loans can enhance a borrower's creditworthiness, while defaults can significantly damage credit scores.