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Credit scores are important if you ever want to borrow money from a financial institution, whether it's to purchase a big asset like a house, or to buy those sneakers you've been eyeing for months. Read on to find out what exactly a credit score is, how it works, and get a few tips on how to improve yours.
| Category | Details |
|---|---|
| Definition | A secured loan requires the borrower to offer an asset, such as a car or property, as collateral. This asset secures the loan until it is fully repaid, at which point the borrower regains full possession. |
| Legality | Secured loans are completely legal. Lenders take a calculated risk by lending money and may initiate repossession if the loan is not repaid and there's no insurance on the loan. |
| Advantages | - Lower lender risk, allowing for larger loan amounts. - Longer repayment periods are often available. - The lender does not take physical possession of the asset during the repayment period. |
| Disadvantages | - The borrower risks losing a valuable asset if unable to repay the loan. - Example: A student using a car as collateral for a study loan risks losing the car if unable to repay. |
| Practical Note | Using loans wisely can alleviate financial pressure. For those looking to compare personal loan options (unsecured), tools like comparison websites can provide quotes quickly, helping borrowers make informed decisions before committing. |
Prices quoted are correct at the time of publishing this article. The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.