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Yellowstone Capital LLC reviews the differences between Secured and Unsecured Loans

Yellowstone Capital LLC reviews the differences between Secured and Unsecured Loans

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There is mainly one difference between a secured loan and an unsecured loan. While a Secured loan is protected by an asset, the unsecured loan is not. Nevertheless, there are also a number of other things you need to consider while making the decision between a secured loan and an unsecured loan.

The Risk Factor

In case of a secured loan the risk lies with the borrower. He offers collateral to obtain his loan and stands a chance of losing that collateral in case of default. The lender, on the other hand, is well-protected by the asset that secures his loan. In case the borrower defaults on repaying the loan, he always has the option of selling the collateral and obtaining the money. In an unsecured loan, however, the risk is more with the lender. The borrower stands to lose nothing if he defaults on repaying the loan.

Interest Rate

Since the secured loan is given on a lien it has a lower interest rate when compared to an unsecured loan. The risk is less and the lender feels safe while lending this loan. On the other hand, since the unsecured loan comes with no protection, the risk increases and so does the interest rate.

Loan amount

Since the loan is protected by an asset, the loan amount that you can get through a secured loan is bigger when compared to an unsecured loan. If you are looking for a bigger unsecured loan, you might have to shell out more in terms of interest and fees in order to reduce the risk of the lender.

Most startups and small businesses find it difficult to obtain secured loans since they have nothing to offer as collateral. As a result they opt for unsecured loans despite their high interest rates and exorbitant fees.

Getting an unsecured loan from a traditional bank or financial institution can be very tough since it involves stringent qualifying requirements. A lot of documents will have to be submitted to prove your ability to repay the loan since the lender here has no collateral to bank upon. This delays the processing of loan, increasing the time span of obtaining the funds. Small businesses that do not qualify for such loans, or do not have this kind of time, turn to alternative lenders, who can suffice their financial needs efficiently.

Yellowstone Capital LLC is one such alternative lender that has funded many small businesses across industries. Through a well-connected network of alternative lenders, they finance even those loans that seem difficult to others.  The Post provided by www.unsecuredbusinesscashadvances.com  team.

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