Unsecured Personal Loan vs. Secured Personal Loan: Which Should You Choose?

Dreams turn to reality through hard work and tinge of luck. But this may not always be true, especially at a time when money is rapidly dominating the society. For banking institutions though, dreams and money always work side by side which is understandable as the nature of their business is all about money. Truly stated, banks can make dreams come true through loans like an unsecured loan – but they also make nightmares – real life nightmares!

What makes secured personal loans scary is not the monthly amortization alone but the thought of losing a priced property used as collateral should the borrower not pay the dues. Managing finances efficiently surely do wonders, but problems along the way are uncontrollable, and that includes the economy and lay-offs.

To keep your assets at a safer bay, unsecured personal loans are given as alternative form of loan by banks and other lending companies. Without a requirement of collateral, borrowers have easier time applying and getting approval. The more lenient policies of unsecured personal loans make this option the best choice for borrowers.

Unsecured personal loans are perfect for those with plans to invest on business yet do not have capital. People who want to build and upgrade their credit rating can also use it as foundation for further investments and eventually, cut liabilities until zero.

Note, however, that banks offering this type of loan greatly consider the purpose for the borrowed amount as they take into account the possible ways to have their money paid back. Extra points will be given towards approval if a feasibility study or a detailed allocation of funds will be presented. Some banks, like Westpac, even assist in furnishing plans for higher financial success rate; thus, protecting their investment on the borrower. They do forecasts and give strategies on ensuring appreciation of funds. Most banks also offer financial advisory services and additional financial evaluation while the borrower is still in the process of starting the investment. Banks can monitor borrowers’ flow of money as it is a way of monitoring their own income.

Although unsecured personal loans have higher interest rates in general, this should not be a problem for those with definite plans. Secured personal loans have higher cap of maximum loanable amount, but using what is borrowed through unsecured personal loan to save for collateral for future use, is a smart way to use the latter as a stepping stone for higher loan amounts in the future.

Always keep in mind that many successful entrepreneurs started with nothing and took the risk of high-interest loans. Many struggle in paying the loan used as capital for their investments, but the outcome can be worth the hardship. Banks may use dreamers to earn more, but you can always do the same thing and make more money out of their lent amount.

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James Henry Abrina is an editor, writer, SEO specialist and currently a Corporate Communication Professional, Market Desk Strategist, Business Development Officer and Unit Head for Business Profiles Incorporated.

He currently specializes in security management and business intelligence. Together with the company, he advocates Business Continuity Planning to change how the Philippine business sector sees the definition of crisis response and management.

For more useful information, read his articles at Triond and Masscom Tutor. Or his EzineArticles page.