A Secured loan is a type of loans where you borrow the money you need depending on the collateral you own to secure your loan. If you fail to repay the loan, the lender will use your collateral to recover its amount. Secured loans are widely used for building a bad credit history.
Interest rate and collateral requirements
The interest charged for the loan is about 5 to 6 percent of the principal amount. The borrower has to place any valuable asset or property, which is worth the amount of money he wishes to borrow. The collateral is also called mortgage. It can be your home, or even your car. Sometimes a lot of paper work is required in case of secured loans which is why you will have to wait till you get the amount of loan. However, borrowers get plenty of time to return the loan. If the borrower due to some reason is unable to arrange the repayment in the time allocated, then the bank or lender holds the right to seize 85% of the borrower’s property. you can go through loan qualifications for more info. about the collateral requirements.
Bad credit Loans in Canada
Loans have always been a pain in the neck when it comes to repayment. Some people have been struggling with a bad credit history wondering if they could get a loan again. Luckily, bad credit loans in are available widely in Canada now. According to the statistics, 3 percent of the Canadian families took these short term personal loans in the year 2005. On average, Canadians borrow up to $ 300 for 2-weeks. The personal loan industry earns more than $2 billion each year and by now there are 1350 storefronts in Canada that are providing these bad credit personal loans.
When to consider a secured loan?
Primary benefit of the secured loans is that you get to gain access to more money just because you have backed your money by an asset. The processing of the loan might take some time because the bank or financial institution has to verify the collateral. This prior due diligence can be worthy for you as the more valuable an asset is, the lower will be the interest rate. People take secured loans for financing their larger home renovations and other big projects. It is also helpful in debt consolidation. If you have a large outstanding debt, you can use a personal loan to consolidate your debts into a single loan. It comes with lower interest rates so this personal loan will be manageable.
According to the Statistics Canada Report 2007, these loans are attractive because people with poor credit ratings or even a history of bankruptcy have an option of using this means to pay off their previous loan or even meet their financial needs. However, the bad credit loans are going to come with a little higher interest charge for those individuals who have a bad credit history.