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Home and Tenant Loans

AlexMayor | Jan 6, 2010 |

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If you want to borrow money and if you own a home than you have several options to consider. Your main options are if you want a secured personal loan or an unsecured personal loan. You can only apply for a secured loan if you are able to provide collateral with your home or any other real estate property. This article will explain the difference between secured and unsecured loan and explain why you should use your home as collateral.

Any company that provides a tenant loan to you takes a risk by borrowing you money. A tenant loan varies between $1k and $25k and when a company provides you with this money they have a chance that you are not able to repay it. That is why they will calculate up front what the risks are and adapt their interest rate on it. If you are considered a high risk than you need to pay a higher interest rate for you loan compared to when you are considered a low risk.

However, there are ways to reduce the risk and the way how to do this is by providing collateral. If you are a home owner than you are able to use your house as collateral and secure your loan with it. In this way if you are not able to repay the loan, companies can claim your house to make up for their losses. Because you are securing your loan, companies consider you as a lower risk and that is why the interest rates will drop and the amount of money you can borrow will rise. That is why it is called a secured personal loan.

But not everyone can secure his loan because he does not own a house. If this is your situation than you are a tenant and that makes you eligible to apply for an unsecured tenant loan. They are a great alternative if you can not apply for a secured loan but they do have some disadvantages. Because you are a higher risk, the interest rates are higher and the amount of money you can borrow is lower.

It is not always advised to use your house as collateral because there is a risk you can loose your house. This is especially the case if you own a company and you need a loan for your company. Never secure your house for a loan for your company because if you go bankrupt you will also loose your house. In any other cases it is always to your advantage to secure your loan with your house.