Loans: Basic Types
Loans are some of the most useful financial instruments powering and driving the market and economy of today. A loan works on the principle that an immediate boost of cash can help stabilize a bad financial situation, and can easily allow the borrower to repay the loan in the stipulated time.
A loan is what has saved many a modern day businesses from going out of business soon after setting shop. It is what has infused the business with the much needed cash to revive its sagging fortunes and turn it into a profitable business.
However, loans are required not just by ordinary people. As such, there are several types of loans. Some the various types of loans are described as under:-
Secured
These are loans which require a guaranteed asset or collateral to be granted and approved. Most loans are thus secured, because most banks ask for an assurance in terms of properties or other non-movable objects, which upon being sold of can be used to recover part or whole of the loan.
Unsecured
Unsecured loans as the name suggests, do not require a guarantee or collateral to be given access to the loan. Most loans are usually not unsecured because the creditor is at a great risk of losing all of his money in case the debtor is unable to repay the entire loan. Thus to prevent such a possibility, unsecured loans are given only to those applicants who have exceptionally high credit scores.
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