Hitch - Secured loans VS unsecured loans

Secured loans VS unsecured loans

Date: Jan 20, 2023

The most common lending products today are unsecured credit cards. Unsecured cards are very easy to access but can have super high interest rates. This is because lenders have to factor in the risks associated with unsecured lending. But for responsible borrowers, there are other loans that have much lower interest rates.

For instance, a home equity line of credit (HELOC) is considered a secured loan because it's backed by the value of your home. The interest rates on HELOCs are usually much lower than unsecured loans like credit cards. Which have rates from about 20% to 30%. In contrast, the average HELOC interest rate is currently around prime + 0.75%, or about four to six percent.

A secured loan is one in which the borrower pledges an asset (e.g. a car or property) as collateral for the loan. The lender has the asset to back the loan if the borrower defaults on the loan. So, while the interest rates may be higher than for unsecured loans, the risk to the lender is lower, which is why secured loans usually have lower interest rates than unsecured loans.

A personal loan is an unsecured loan that does not require any collateral. Personal loans are often used for debt consolidation or to make a large purchase. The interest rates on personal loans are usually lower than the interest rates on credit cards.

In conclusion, secured borrowing can offer a much lower interest rate and monthly payment compared to credit cards and personal loans.

Hitch Inc. NMLS 2383367

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1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs. The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Our borrowers get their cash on average in 26 days. The time period calculation to get cash is based on the first 6 months of 2022 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend. The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.4. By inputting your phone and clicking the "Check my rate" button, you authorize your wireless carrier to use or disclose information about your account and your wireless device, if available, to us or our service provider for the duration of your business relationship, solely to help them identify you or your wireless device and to prevent fraud. Additionally, you authorize Hitch and its service providers to obtain your name, address, email and Social Security Number from Equifax in order to validate your identity and/or populate this form. See our Privacy Policy for how we handle your data.

Hitch, Inc.2158 NW Toussaint DriveBend, Oregon 97703(833) 512-0284