There are many types of conventional loans, secured loans, mortgages, signature loans and car loans just to name a few, each with their pros & cons. Certainly you will need to weigh the pros and cons of the types of conventional loans, and how they fit into your financial needs and budget.
Loans will typically fall into one of two categories: unsecured loans and secured loans.
A secured loan, also known as a collateral loan, is where collateral is offered and will be sold by the bank to re-pay the money borrowed in the event of a default on the loan. Banks will usually accept property, stocks and bonds as collateral until the secured loan is paid back in full. Some of the advantages of a secured loan are a chance at having a lower interest rate and convenience. Lenders are more likely to loan money and at a lower interest rate when assets and collateral are used. The risk, of course, is losing the collateral that you or a co-signer has used to secure the loan.
An unsecured loan, or signature loan as it is often referred to, is a loan that is not secured with collateral. These loans are based primarily on your credit rating, the amount of income that you earn and your debt to income ratio. You can expect to have a higher interest rate with an unsecured loan versus a secured loan. However, one of the pros to this type of conventional loan can be the convenience of a quick loan with no application. Imagine how fast a credit card transaction takes place; it can take only a few moments to receive a loan for an item that you want to purchase.
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