Secured or Unsecured Loans: Which is Better?

When looking for lending options, it’s common to shop around to multiple lenders. You may find that multiple sources can provide you with funding, but the type of loans they offer may vary dramatically. This doesn’t just refer to the amount they offer, or the particular terms of the loan. Many lenders, such as banks and credit unions, specialize in unsecured loans. Others, like auto title loan lenders, offer what is known as secured loans. Knowing the differences and advantages of these types of loans can make a world of difference.

Secured Loans

Secured loans, such as auto title loans, are quite literally “secured” by a source of collateral put up by the borrower. This collateral acts as assurance to the lender that a borrower has a second source of loan repayment, in case the borrower defaults on the loan. Collateral that is accepted for a secured loan may vary, depending on the lender or the amount of money the borrower is attempting to receive. For example, most auto title loan lenders use the physical title to a qualifying vehicle as collateral, not the vehicle itself.

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Unsecured Loans

On the other end of the lending spectrum is unsecured loans. This type of loan typically does not use a collateral-based system. Instead, the borrower’s creditworthiness and history with the lender largely make up the qualifying criteria.

Which Type of Loan is Better?

Like most financial decisions, there is no one-size-fits-all option when it comes to the best type of loan. There are many factors to consider, and what is best for one person may not hold true for another.

Unsecured loans are considered to be a bigger risk for the lender. Since there is no property that is used for collateral, there are more restrictions placed on them. This can make unsecured loans harder and more costly to obtain. Unless the borrower has impeccable credit, they may be unable to qualify for an unsecured loan. And even if the borrower does manage to meet the requirements, interest rates can be set significantly higher than many types of secured loans.

Secured loans have the advantage of using a source of equity, such as a vehicle title with an auto title loan, as collateral. This reduces the amount of risk a lender has to incur. Imagine this scenario: Someone asks to borrow your phone for a few minutes. If they leave something of value with you, like a watch or an ID card, you are more likely to believe they will return than if they left nothing at all. Secured loans work on the same principle.

Using a source of collateral has more advantages than just putting the lender at ease. They typically have more relaxed credit requirements, which may make it easier for borrowers to qualify. They also often require far less paperwork and wait times when compared to unsecured loans. A reduced turnaround time makes secured loans an attractive option for borrowers who need expedited funding.

Ultimately, the type of loan that is best for you is the one that meets your needs. If you have perfect credit and no viable source of collateral, an unsecured loan could be worth exploring. If you need to borrow funds in a short amount of time, have collateral like a free-and-clear auto title, and worry that your credit will be a roadblock, secured loans like auto title loans may be the better option.

Now that you have a clear understanding of how these types of loans work, you can make a fully informed decision based on your needs and situation.

5 Things College Graduates Should Know About Money

For many new college graduates, stepping out into the real world can be a terrifying experience. For the first time in their lives, many new grads find themselves without the structure and support of parents and educators. Among the many new experiences and situations they will encounter, dealing with financial matters can be unfamiliar territory. There are many things new college graduates should know about money, before taking the plunge into adulthood.

Don’t Make Money Your Sole Career Decision

Many college graduates make the mistake of going with the first job they can find, or choosing the one offering the most money. While money is a major factor in planning your career, it shouldn’t be the primary deciding factor. Consider what you want to get out of your career, and where you hope to be in 5 years. Make sure that any long-term job you commit to is one that you will be satisfied with down the road. Is it better to take a high paying job that will leave you feeling burnt out in a short while, or a slightly lower paying job that you enjoy? These are important questions that will not only affect your present, but your future as well.

Create a Basic Financial Roadmap

There are countless expenses that you will be faced with when living on your own. Apartment rentals, security deposits, car payments, utilities, and living expenses are only a few. Before jumping in with both feet, it’s crucial to create a basic financial road map.

This will include all of the expenses you will be responsible for, and how they will factor into your current income. This will allow you to safely plan for your new financial responsibilities, and spot any major problems before they occur. Also, make sure to leave yourself some wiggle room and put some money into savings, for any unexpected expenses that will no doubt occur.

Understand the Difference between Gross Income and Take-Home Pay

This may seem obvious to many, but the difference between gross income and take-home pay is an important distinction to make. Gross income is the amount of your salary before tax withholdings and other deductions, such as health insurance. Your take-home pay is the amount of money that you will receive in your regular paycheck. When planning your finances, always use your take-home pay as a point of reference, as it will likely be less than your gross income.

Create a Due-Date Calendar

One of the biggest mistakes recent college graduates make with their finances is losing track of when their bills are due. When you’re working 40 hours a week, it can be easy to forget to pay the cable or electric bill. Most services offer automatic billing, but it is still a good idea to create a due-date calendar. Write down when each individual bill is due, and place the calendar somewhere you will interact with it on a daily basis, like near your keys or on the refrigerator. This will help you stay organized, and avoid surprise blackouts.

Invest in Renter’s Insurance

It may seem like an unnecessary expense, but investing in renter’s insurance can save you considerably in the long run. Renter’s insurance acts as a safeguard for your property, and is considered essential for all renters. Rental properties are susceptible to many forms of damage, including fire, theft, or natural disasters. Because of this, rental insurance is a worthwhile investment. Make sure to shop around, and find a policy that includes the 3 main coverages: personal property, liability, and additional living expenses.

While there are countless financial situations that may occur for college graduates, these 5 tips will help you get started on your journey into adulthood.

5 Ways to Save Money on Car Insurance

Many people know that being a safe driver can effectively lower their car insurance payments, but there are a few clever and little-known things that can also help you save money on car insurance payments. While calling up your insurance company and haggling over prices may not be the most fun way to spend an afternoon, doing so can help keep a significant amount of money in your pockets. Here are 5 ways you may be able to save money on car insurance costs.

Get Married

No, we’re not suggesting you tie the knot just to save on insurance costs, but most insurance companies charge married people less than singles. The savings are more considerable when you are younger, which is also when car insurance rates tend to be the highest. If you are married and around 20 years old, you could pay 21% less for an insurance policy than if you were single. This is because insurance companies consider married people to be less likely to be involved in an accident. A 2004 study backs this up, by finding that unmarried drivers have twice the risk of driver injury than their married counterparts.

Drive Less

This may not be possible for everyone, but in most states, insurance companies reward drivers who use their car less. This is because, statistically, the more time spent on the road means the greater chance of an accident. To give you a better idea, drivers who put 20,000 miles on their car each year typically pays 9% more than someone who only drives 5,000 miles.

Work a Safer Job

Again, this won’t apply to everyone, but there are some professions that insurance companies see as “safer.” These jobs include teachers, nurses, accountants, and similar professions. It may not be a universal truth, but it’s worth asking your insurance company if your job makes you eligible for a discount on your policy.

Be a Good Student

Most insurance companies offer discounts for students who earn good grades. The savings you could receive if you are an enrolled student who earns good grades can be as high as 25% at most companies, yet this is a discount that very few people take advantage of. If you meet these requirements, the savings you could get from that 4.0 GPA could be substantial.

Take Defensive Driving Classes

Most drivers would balk at the idea of taking additional driving classes once they’ve received their licenses, but taking defensive driving classes could well be worth the effort. Additional and optional safety classes can help assure your insurance company that you are a safe driver who is less prone to accidents. It’s worth looking into, as these classes require a minimal amount of time to complete, and could provide savings for years to come.

If you fall into one or more of these categories, consider giving your car insurance company a call to see if you can have your rates lower. A small investment of time could equal major annual savings.