Secured loans can be a confusing subject for many people because they are basically regular loans. The only difference between a secured and a regular version is that the secured variety require you to put down some sort of collateral.
This might be great for someone who has cars, homes, and property, but for the average citizen it just doesn’t seem fair. How in the world can they expect you to own something to put down as collateral if you are so short on cash that you need a loan in the first place?
Payday Loans Have Built In Collateral
One of the great things about payday loans is that they are more or less secured loans already. They have a collateral system built right into them because you will get billed by your next paycheck (if you don’t simply pay back the money before then).
This is a very easy and a very convenient way of borrowing at the same time, because putting items up for collateral can be a pretty tricky process. Payday loans continue to make things easier and convenient for everyone.
Having Collateral Creates Lower Risk
The reason that having collateral is such a good thing is because lenders need to watch out for themselves and make sure that they are paid as well. It can be very difficult to lend to someone without very good credit because a lender doesn’t know if they are just going to run away with the money and never pay it again.
However, it is also important to know that with a collateral system a lender can charge a lower interest rate because the lending process has become simpler. Basically collateral is something of value like a car, a boat, or jewelry. You promise to pay back the loan and if you don’t you give up the collateral. They know they will end up getting their money regardless, so they don’t have to charge you as much for the interest and transaction.
So, by being able to have collateral built right into your secured loans you are actually paying an even less rate than you otherwise would for a payday loan lender! Overall it’s about making sure you get the best bang for your buck you can and the payday loans are completely able to do that. It’s a fair (and convenient) deal for everyone!
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