Secured loans means when the person gets the loan on security. At the time of borrowing money from the bank the person needs to give their assets documents to the bank. It works like a guarantee for the bank that the person will make the payment on time. If the person fails to pay the loan amount on time then the bank four features their property or gold whatever think they have kept as collateral security. There are different types of loans & credit so the person needs to keep security amount accordingly. Next comes the unsecured loans which mean that when the bank issues loan without keeping any security papers. \
A detailed description about unsecured loans
The best part about unsecured loans is that the person needs not to give any property document to the bank. The interest-rate of unsecured loans is higher than secured loan. If they don’t want to give any security amount to the bank then for them and secured loans are best. It is the simple procedure as the receiver only needs to sign the document.
Two important factors which affects unsecured loans
The duration of unsecured loans is shorter than the other category of loan. They are usually granted for several months because the financial institution does not ask for any security. The maximum period of unsecured loan is up to 5 years. But when we talk about secured loans then the person can use the loan for more than 30 years. The category of loan depends upon the time factor like suppose if the person wants to buy a car then deal loan is issued for 5 to 7 years.
Income tax deduction
The person issuing unsecured loan does not get any income tax benefit as they are not keeping any mortgage. If the person gets income tax benefit then they can save money by paying less tax. Both types of loan have their own benefits.