Nobody can predict the future. Even national governments get caught unaware by freak occurrences because life is so unpredictable. We never really know what’s around the corner.
On a personal level, our emergencies can be managed because we’re able to rely on others around us. For the lucky ones that mean friends and family are able to help in all sorts of situations. For the less fortunate it means seeking professional help, which could be in the form of advice, a service or even cash itself.
Loans aren’t unusual, and they come in two main formats – secured, and unsecured. It’s very rare to go through life without needing a loan at some point. A lot of people don’t even realise that they are using loans. For example, a mortgage is a secured loan, meaning most homeowners are borrowing money. With a mortgage, the loan is secured against the house, meaning if you default on payments the lender can take the house to recoup their cash. Over 100 million Americans have car loans too, which is another form of a secured loan.
You can get an unsecured loan as well though. This means there’s nothing to hand over but as you would guess, unsecured loans have other conditions. After all, nobody’s just going to loan you money with no terms from their end. A good example of an unsecured loan that lots of people already have is a credit card.
If they had the choice, most people would stick to unsecured loans. It keeps their property safe in the event of a default. Lenders know this too though so they’re more picky with unsecured loans. Unsecured lenders like Western Shamrock Corporation are in the business of statistics. They use information on you and your finances to figure out how much you’re able to afford in repayments. Your credit score and history are also going to be looked at because they’re the best indication of how you behave. If you’ve been reckless with your credit in the past, this can count against you for an unsecured loan.
This type of loan tends to have higher interest payments as well, to reflect the risk your lender is taking. Despite being unsecured, your belongings can play a part too, since the creditor is still able to take you to court if you default. In that situation, the value of your assets plays a part in your ability to pay, so lenders might still consider your assets.
Secured loans are linked to an asset, which the lender can take ownership of if you fail to repay the loan. This type of loan tends to have lower interest rates and can be for a bigger amount too. If it is for a large amount, such as with a mortgage, then the repayments can be over quite a long time period. Dealing with bigger amounts and longer timescales is an incentive for lenders to lower interest rates even more.
A secured loan is usually the better option for large sums since you can take advantage of the low rates. Your credit history and finances will still play a part in what loans are available to you as well.