As the name suggests, secured loans are the one that keeps an asset as a security to assure that the loan is repaid. In case of any default, the bank is liable to keep the asset, kept as security at the time of the loan, and get the amount back.

Why are secured loans better and preferred?

Secured loans are considered to be a safe lending option since it assures safety and amount repayment. The borrower cannot delay or abscond from paying the instalments having a fear to lose his/her property or any asset kept as collateral.  It’s a safe way to obtain large amounts of money as one of the properties is at stake.

Features and Benefits of Secured Loan

  • Low interest rates
  • It’s a huge amount and has assured security, therefore, interest rates are quite low as compared to other loans.
  • High borrowing amount
  • Secured loans usually offer a high amount, it’s one of the major reasons they have collateral to obtain the amount safely. The amount is equal to the market value of a home or more than that.
  • Long repayment term
  • Since the amount is big, therefore, the duration of repayment is also long so that the borrower feels at ease to pay the instalments.
  • Faster approvals
  • As security is the first priority and it’s a form of safe lending, therefore, approval over such loans is faster as compared to other loans.
  • Varying EMIs
  • EMIs can be fixed rate or flexible depending on the requirements of the lender.
  • Customized loans available
  • There is an option available to customise the loan as per the needs of the borrower.
  • No guarantor required
  • Since there is assured safety in the form of collateral, therefore, no guarantor is required for this type of loan.
  • Types of secured loans

Home equity loan: A loan that keeps the home equity as security for the amount taken as loan. Equity is the difference between the value of the property or home and the amount owed on the mortgage

Mortgage loan: A loan that keeps the property on which the loan is taken as the security. If a borrower takes a loan to buy a home, the same home is mortgaged. In case the borrower is unable to make the repayment on time, the bank has complete rights to take control over that property and sell it to obtain the loan amount.

It is important to estimate your expenses before taking a mortgage loan since it has various components. The monthly payment along with principal amount and interest also has tax and insurance charges added. Therefore, take the loan on the lowest interest rate and choose the best offer available.

Nonrecourse loan: A loan that keeps the property as a collateral. In this type of loan, if the bank is unable to obtain the entire loan amount after selling the collateral, the borrower does not hold any responsibility for the remaining amount. The lender is accountable for the remaining amount.

Car loans: A loan that is offered to take a new car but keeps the same car as security. If the borrower is unable to repay the instalments or defaults the loan, the car can be taken in custody by the lender.

Eligibility for Secured Loan

Applicant must be an adult above 18 years of age. Some banks may offer a loan to the applicant above 21 years of age.

Minimum annual income of 2 lakhs per annum, however, some may offer above 3 lakh per annum.

3 years of profit statement of business

Assets equivalent to loan amount applied for or maybe more than that.

Required Documents

Different loan types have different documents however few of them are common for all the loan types.

Home loan

ID proof – Passport, Driving license, Voter ID, Aadhar

Residence proof – rent agreement, phone or electricity bill, any government issued document having the current address.

Bank statements – Last 6 months statements

Mortgage loan

ID proof – Passport, Driving license, Voter ID, Aadhar

Age proof – Birth certificate, educational document showing your age, passport

Income proof – salary slips for last 3 months, TDS document, certified income document

Residence proof – rent agreement, phone or electricity bill, any government issued document having the current address.

Property documents – Original copy of property papers kept as collateral against the loan.

Bank statements – Last 6 months statements

Car loan

Income proof – salary slips for last 3 months, TDS document, certified income document

ID proof – Passport, Driving license, Voter ID, Aadhar

Age proof – Birth certificate, educational document showing your age, passport

Signature proof – specimen signature for verification

Residence proof – rent agreement, phone or electricity bill, any government issued document having the current address.

Bank statements – Last 6 months statements

As far as safety is concerned, secured loans are considered a suitable and smart option available in the market since the repayments are secured and assured. It is more suitable and preferred option for lenders as it has less risk involved or they have property or any asset as security, however, the borrower has the surety of repayment by hook or by crook with the fear of losing the prized possession. The borrower is bound to repay. Therefore, it is advised to the borrower to be careful before getting into compulsion. It’s a lifelong decision, make it wisely explore a friendly option where you don’t feel burdened to shed the monthly EMIs rather enjoy the feeling of possessing something valuable that seemed unaffordable.

Summary
Secured Loan
Article Name
Secured Loan
Description
Guide to know more about different types of unsecured loan, Features and benefits , Eligibility and Documents
Author
Publisher Name
Instant Banking
Publisher Logo