| As the caption itself indicates, low interest rate loans | | | | The lower rate of interest in case of the first lender |
| are the loans offered by finance companies/lenders to | | | | makes the loan cheaper than the loan offered by the |
| borrowers for various purposes at low rate of interest. | | | | second lender. |
| Broadly, there are two types of loan-Secured loans | | | | Low interest rate loans are available in most of the |
| and unsecured Loans. Secured loans are those, which | | | | types of loans such as secured and unsecured home |
| require you to offer the lender any of your assets, | | | | loan, auto loan, personal loan etc among others. |
| most commonly a house, as collateral. For lenders, this | | | | However, to borrow a low interest rate loan, |
| collateral serves as a security against defaults in | | | | borrowers need to fulfill certain criteria, some of which |
| payments by the borrower. If you, as a borrower, do | | | | are: |
| not pay back the money borrowed by you to the | | | | I. Offer collateral as security in case of secured loan. |
| lender, lenders have the power and authority to | | | | II. Should be in service or self-employed |
| encash the collateral to recover their payments. | | | | III. Must be living in the current house for more than a |
| Therefore, such loans are called secured loans. | | | | year. |
| Contrary to secured loans, to avail unsecured loan, | | | | IV. Should have a clean bank statement. |
| borrowers do not need to offer any collateral. | | | | V. Should have good credit score. |
| Therefore, the lenders have more risk in unsecured | | | | VI. Should not be a defaulter previously. |
| loans than in secured. To compensate the increased | | | | VII. Any proof of successfully closing any loan |
| risk in case of unsecured loan, lenders charge higher | | | | previously. This adds the most in borrower's profile, |
| rate of interest in such loans. Where in case of | | | | which results in lower interest rate. |
| secured loans, lenders charge low rate of interest due | | | | VIII. Two references. |
| to low risk element. | | | | Lenders request for the above criteria to establish the |
| Now-a-day, financing companies have started low | | | | credibility of the borrower and so the risk associated |
| interest rate loans in case of unsecured loans also, | | | | with the loan offered to you. In case of low risk, |
| which effectively means, between the two lenders | | | | lenders always charge low interest rate. |
| one may offer a lower rate of interest than the other. | | | | |