Borrowing Products
In this task I am going to be examining the different types of secured loans and give explanations and reasons to why interest rates vary between borrowing products as well as examining the mortgage products in relations to the scenarios given and give reasons to why they should choose that specific mortgage within the case study received.
The difference between a secured loan and unsecured loan is that with an unsecured loan this is authorised with a fixed term and a fixed interest rate, which is issued only by borrower’s that generally have credit ratings that are high in order to be approved for an unsecured loan and is also obtained without the use of property as collateral for the loan. Whereas, a secure loan is when making big purchases to allow the consolidation of the existence credit, however, when in process of taking out a secure loan it may increase the amount you pay back at the end of the set period in which you are in debt by. Interest rates between secured loan and unsecured loan vary due to the secured loan being cheaper because it’s for an asset that is owned usually by your home. Whereas, unsecured loan is more expensive for the lender as the bank has less control so this means that nothing can be taken away because it is not based on an asset.
Interest rates change according to the products borrowed because when using a mortgage as an example where it is a large amount of money the interest rate will then be low due to the mortgage being paid over a set period of time and the lender’s would gain more money as a certain amount is being paid monthly. On the other hand, with a loan the interest rate is high and the amount withdrawn has to be paid back in a short amount of time, the bank will then gain money through mortgages rather than loans and this will make borrowers eager to want to pay back the loan. The interest rate