Loan is such relationship between the lender and borrower. In other words, it is an agreement between two persons or entities –the lender and the borrower– in which both sides agreed upon the type of how, the amount, ways of borrowing, time to repay, and also the interest rate. However, the lender shall take all the precautions needed to secure himself in case the borrower does not pay back the loan. The loan includes not only money, it also includes property or any other material goods.
In the following few lines, Mresco will tackle everything related to loans and its types.
In General, there are two types of loans which are the secured loans and the unsecured loans.
It is the type of loans in which the borrower commits a tangible thing (a property or a car) as a collateral agreement. The secured loan includes mortgage loan, car loan, home equity loan, home equity lines of credit, direct auto loan, and indirect auto loan. This type of loans is called “secured” as it saves and guarantees the lender’s right via owning any asset the borrower’s own such as a home, a car, or anything. So, if the borrower could not pay back, the lender has the right to own his assets as agreed upon.
From its name, this type of loans is not secured at all as the only thing the lender/ the bank can do if the borrower could not pay back, is to freeze his accounts as such type of loans is guaranteed via the borrower’s credit history, income, and assets. That’s why, the interest rate is much higher in compare to the secured loans. The unsecured loans include the personal loans, the personal lines of credit, the student loans, and the credit cards.
Before thinking about taking or giving a loan as a lender or a borrower. It is vital to know everything about loans and choose the best type that suits you the most.