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Various banks and financial institutions in the UAE offer multiple loan options to help people manage their dues and other finances. Whether you need to renovate your home, travel or pay for your child’s higher education, you can get easy loan approval for almost everything.
In fact, you may have already gone through some of the loan options, their interest rates and repayment options when in need of funds. But while exploring your options, did you ever check if you should apply for an unsecured or a secured loan? You may have not.
Most people do not even consider this as a topic for discussion. The reason behind this is the set of advantages both types of loans offer. You can simply choose the one that best fits you based on your financial preferences.
While both types of loans fulfil your financial needs, you must know which one is better and appropriate for you. Keep reading to learn more about both secured and unsecured loans, how they are different from each other, and how one can be better than another. Let us begin with knowing what they are.
Personal loans are not backed by any asset such as a vehicle or property, so they are also called unsecured loans. They are easy to obtain with a good credit score. The banks in the UAE offer personal loans for both fixed and variable interest rates with a flexible repayment term.
Personal loans offer higher interest rates, and failure in repayment can incur additional charges and pile up the dues for the borrower. Before applying for a personal loan, you must analyse your financial condition to make sure that you will be able to repay the same. In case you miss out on EMIs or do not repay your unsecured loan on time, you may end up spoiling your credit report.
Secured loans are the credit agreements supported by an asset, such as a property or a car that the applicant owns. By keeping these assets as a security, the banks decrease the amount of risk assumed as they take over the asset and recover the necessary payments if the borrower is unable to pay off the loan. Secured loans are also called second mortgages.
You might need a secured loan to cover your expenses for a new car, wedding, holiday, travel, home improvements and much more. Here are a few examples of secured loans.
The banks offer a longer repayment term for secured loans in comparison to the unsecured ones. And longer repayment period leads to lower monthly EMIs.
Here are a few factors that make a personal loan different from a secured loan.
Here are the main reasons why you must take a personal loan.
Here are the major reasons why you must take a secured loan.
People take a loan to fulfil their financial needs, and both these types of loans help accomplish this motive. The foremost benefit that you get if you apply for a secured loan is that you will get lower interest rates and a fixed repayment term. And if you apply for a personal loan, you can get flexible repayment terms, but the interest rates will be comparatively higher.
So it all depends upon your financial preferences. If you have no assets to provide and still need funds to pay your expenses, you can opt for a personal loan. On the other hand, if you are looking for a secured loan with an asset in hand, you can avail the same.
If you want to know your monthly EMI amount for a specific amount of personal or secured loan, you can use online loan calculators available on our website to evaluate the same. Even if you want to check your credit report, you can call us anytime and our financial experts will help you with the same. If you need to apply for a personal loan, our representatives will take you through the best unsecured loans for bad credit scores. Moreover, they will guide you through the process and help you submit a loan application for your preferred loan type if required.