Types of Loan

When it comes to loan, there is more to it than simply being lent a sum of money and paying it back.

There are other factors to be considered.

The key factor to consider is whether the loan is SECURED or UNSECURED.

An unsecured loan is one whereby the bank simply lends you the money - having no doubt checked out your financial records and credit history to establish that you have a chance of paying the money back.

However, you do not need to stake anything of your own against the loan to give the bank reassurance that you definitely will pay back the loan amount - and therefore it is termed as unsecured.

A secured loan, however, is one where you secure the debt of the loan amount against something that you own.

Quite often this will be against something expensive, and therefore perhaps a house or other property. Secured loans are therefore the sort of loan that you need to think very carefully against, as if you fail to pay back the loan amount then the asset that you secure the loan with is at risk - you've probably seen warnings about homes being repossessed for instance.

And the mortgage is a special type of loan, that is for a much larger amount than a standard loan and has a longer term, standardly 25 years, and of course if you don't keep up your payments then the house could be taken off you, and this does something happen in practice.

So when you are getting a loan these are the key things to consider, and always think extremely carefully before securing the loan against your assets.

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