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About loans with collateral

What is a secured loan?

A collateralized loan or secured loan is a loan that a bank or other lender has provided to a borrower against the collateral of the borrower’s assets. Collateral can be, for example, an apartment, a car, a motorcycle, or other property owned by the borrower that is suitable as collateral. Secured loans often have a lower interest rate than unsecured loans. This is due to the fact that in the case of secured loans, the risk of the lender losing the borrowed amount is reduced, since in the event of potential insolvency of the borrower, the lender has a kind of collateral as assets to compensate for any losses. Of course, the value of secured loans also affects the interest rate on the loan – the more expensive the asset, the lower the interest rate and vice versa.

What is a mortgage?

A mortgage is a loan that you get to finance the purchase of a home. You can borrow up to 90% of the value of the house. The rest you have to finance yourself. For some loans, you will have to pay a start-up fee or registration fee to be approved for the loan. This entry fee can vary greatly depending on the type of loan and the amount you want to receive. If you are taking out a mortgage, you need to provide collateral. As a rule, the lender takes a mortgage against physical assets. For example, if you are borrowing money for a new home, it is quite normal for the bank to take out a mortgage on the house. If you are unable to repay the loan, the lender has the option to sell the asset, thereby ensuring that it will receive back the value of the loan.

Car loans

Car loans are loans for the purchase of a new or used car on lease or for obtaining funds secured by the car. In any case, the collateral for the loan is a car. Such a loan can be issued online, a quick decision on the loan, you can get with a damaged credit history, the ability to issue without a down payment, in some cases, you need a car assessment and insurance, flexible terms and a large range of amounts. Leasing can be financial and operational. Financial leasing is a typical loan for the entire cost of the car, after payment the car becomes yours. Operational leasing is a kind of long-term car rental, after which you will be able to buy the car at the residual value.

Interest on secured loans

The vast majority of lenders do not specify the interest conditions on secured loans, since the interest rate level is calculated individually, depending on your credit rating, the value and liquidity of your collateral. Interest on a loan secured by a used car is much higher than a mortgage secured by a house. Despite this, in some cases it is possible to negotiate a reduction in interest if you are a very valuable customer for the bank, or you can save on the starting fee for the loan if the bank holds a promotion, this often happens when buying a new car on lease.

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