Are Secured or Unsecured Debts & Loans Better?
Choosing between a secured loan and an unsecured loan when you have the option of either can be tricky. The interest rate and terms and conditions will be more favourable with a secured loan. However, if you run into trouble with paying back the loan, an unsecured loan will make it easier to negotiate a repayment plan with your lender. After all, if creditors can just take the collateral as payment, then they have no reason to accept anything less. That’s how it works with secured credit cards – it isn’t usually possible to owe more than the cash deposit because it would simply be used to pay off the debt and the card would then be cancelled if you run into payment problems.
Debts that Bankruptcy Can’t Deal With
As with all debt, your goal should be to have a clear plan on both how you will use it and how you will repay it. Don’t enter into a borrowing agreement with a plan to default. If you know that you won’t be able to pay it back, then not taking out any loan is your best option (so that you don’t get accused of fraud). Making these plans may naturally lead you to consider unsecured versus secured options as you weigh different payment conditions and the risk of losing collateral against your financial situation. In the end, the better option is the one that better fits what you need, what your goals are, and what you can handle.