Kolkata: Loans are broadly of two types – secured and unsecured. Secured loans refer to those where the borrower pledges a property (or security, insurance policy, rent income, gold etc) to the lender as a collateral for the loan. On the other hand, an unsecured loan is sanctioned and disbursed by the lender without any such backing by any asset.
When you need a loan, sometimes you have the freedom to choose between a secured and an unsecured loan. While a personal loan is a common example of an unsecured loan, loans against property are pertinent examples of secured loans. Most loans don’t carry any conditionalities on the loanee.
Get a lower interest rate
Any secured loan reduces the risk of any lender. The risk arises out of failure of repayment of the loan by the borrower. But a piece of property as a collateral enables the creditor to recover the loan amount in case the loanee unfortunately fails to pay up. This enhanced security emboldens the lender to charge a lower rate of interest from anyone offering property as a collateral. For example, the interest on personal loans given by SBI (State Bank of India) hovers between 11.70% and 14.85%. However, the interest on secured loans (against property) is 1.45% + 1 yr MCLR (=10.45%). This is for loans within Rs 1 crore. If the loan is between Rs 1 crore and Rs 2 crore, the rate of interest charged is 11.10%.
Secured loans can get higher amounts
Any lending institution feels “secured” when sanctioning a secured loan. If you are using a property as a collateral for the loan, the lending institution typically sanctions an amount that is about 65%-75% of the market value of the property prevailing at the time. Since the lender feels more comfortable to issue a secured loan, the amount is usually higher that unsecured loans. For example, the country biggest bank SBI gives a maximum loan of Rs 7.5 crore amount for a secured loan against property. The minimum amount is Rs 10 lakh.
Get a longer repayment period
Secured loans typically allow a longer repayment period compared to unsecured loans. This is helpful when one has to repay a large sum of money. The jugalbandi of lower interest rates and longer payback period is a great boon for the borrower.
If you need a loan, banks and NBFCs will start chasing you with baits of lightning-speed processing. However, if you have any property that you can use as collateral for the loan, tarry a little and use it to secure your loan. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
