Loans are borrowed money from a bank or lender issued out to a borrower or applicant after the filing and approval of all document and subject to agreed terms and conditions given by the lender. Humans always need money for various thing and for some reasons, the needed cash may not be available for use prompting individuals to get loans from banks and repay with interest and some other charges. There are different type of loans and each is classified under secured or unsecured loans. In this article, I will discuss some types of loans and the requirements for approval.
- Secured Loans
Secured loans consist of a group of loans that are approved by banks after the applicant or borrower has agreed to provide an asset or property worth the value of the loan he is requesting. This asset or property is then taken as collateral which can be forfeited if the borrower fails to repay the loaned cash, interest or charges included in the terms and conditions of the loan. Secured loans can be a business loan needed to start up and advance or expand business venture. The main requirement for approval of secured loans is the collateral which is a proof that the money borrowed will be paid. Credit loans, mortgages and personal loans can be secured and in such cases, banks do not need or require your credit report or score for approval. Interest rate for secured loans are not high but individuals can do a good comparison and select the best interest rate and repayment plan that suits them most.
- Unsecured Loans
Unsecured loans are cash given out to borrowers after the bank or lender has approved the loan application based on the provision of some requirement. Unsecured loans is actually unsecured on the part of the financial bank or lender because the borrower has no proof of repayment or collateral other than a document, called credit report which details his or her debt history. This document is mostly checked by lenders before an unsecured loan request or application can get approval. There are individuals with bad or poor credit report and score and as expected, these people have a little chance of getting an unsecured loan from Canadian banks. Personal loans, students loan, mortgage, car loan, instalment loan and other loans are unsecured when approval does not require any collateral in form of deposit or asset and property. In Canada, individuals with poor or bad credit report can still get loans from some few banks and direct lenders.
- Payday Loans
This is another very common type of loan and it is a loan based on the salary earned by the borrower or applicant. Payday loans require no credit report or score but applicant must provide proofs of employment and salary payment, address and link up his or her checking bank account for automated repayment of loaned amount when the salary is paid. This type of loan usually comes with high interest rate with some other charges and fees.