When borrowing funds, whether via a credit card or loan, one of the first choices a consumer has to make is whether they want a secured or unsecured account. Many consumers don’t understand the difference between the two types of loans, so we here at Guaranty thought we would take a moment to explain it for our customers.
A secured loan is one that is connected to a piece of collateral. This could be anything from a vehicle to a home. Collateral is a kind of insurance for the lender that you will make your loan payments on time and consistently or the institution can take possession of the item. These types of loans are easier to get when there is collateral involved because the risk to the lender is low. The most common secured loans are automobile and mortgages, where the vehicle or home is the listed collateral.
If a consumer has a lower credit score and little to no collateral, they may be offered an unsecured loan. An unsecured loan is one that is not connected to any collateral and therefore tends to have higher interest rates. If you default on the loan, the lender can't automatically take your property. The most common types of unsecured loan are credit cards, student loans, and personal loans. Many times, for an unsecured credit card, the lender will ask for a deposit for them to hold in the case that the consumer defaults on their payments.
Which is Better?
Secured loans are a safer bet since they tend to have lower interest rates and give the consumer access to higher lending amounts. Secured loans usually also have a longer payback schedule than an unsecured loan for personal or credit cards.
In terms of paying both types of loans off, most credit counselors suggest that a consumer pay their secured loan first since their collateral can be confiscated by their lending institution for defaulting on their loan terms. However, not paying unsecured loans in a timely fashion can lead to long-term debt and a negative effect on their credit since the interest rates are higher than a secured loan.
Guaranty Bank & Trust is one of the oldest and most respected banks in Texas, and we have a long history of helping our customers achieve their dreams with our secured and unsecured loans.
Recently, we discussed how to recognize fraudulent activity in case your identity is stolen. This month we’d like to discuss how to protect your identity to improve your chances of preventing those fraudulent activities from happening to you in the future. There are several practices that anyone can adopt to help protect themselves and their family from becoming a victim of fraud. We’ve outlined a few for you here.
Begin at Home
You play an important role in protecting your identity, and you should begin by protecting yourself at home. We’ve all heard stories of people becoming targets of identity theft simply because they made the mistake of taking the garbage out to the curb the night before their designated pick-up day. Identity thieves look for the easiest way to take advantage of someone else’s information and your trash can has the potential to be a treasure trove for them.
All identity theft experts advise that no matter your income or credit score, shred all invoices and other documents that include sensitive personal information before throwing them away. In addition to shredding your sensitive documents, it is advised that you create strong passwords for your home computers and online accounts and change them as frequently as every three months. Also, ensure that your firewall and other security measures are up to date on all home computers to help block any identity theft.
Be Vigilant
Many people don’t realize when their identity has been stolen until they receive a bill for something they never ordered, or they receive a call for a missed payment for a service account they never signed up for. Be careful of phishing scams whether they come via phone call, email, or regular mail. Be aware that if you receive a call from a service or government agency, they normally don’t ask you to verify your entire social security number to verify who they are speaking with.
Keep Your Payment Information Safe
Last but not least, be careful of websites where you enter your debit and/or credit card information. If making a purchase on a website, make sure that the site is legitimate and then be sure that they have some safety measures in place to protect your sensitive payment information.