When you are considering taking on an investment property, you need to decide beforehand they type of funding that you will use. Most people don’t have the cash required to purchase a house without a mortgage. With that in mind, there are two types of loans that we will look at in today’s post — secured and unsecured. Apex Capital Group in New Jersey knows just how much an investment property can benefit you, which is why we want to help you understand the ins and outs of this industry so that you can make it work for you. Continue reading to learn about the two types of loans available and call us to learn all that you need to know about investment properties.
Secured Personal Loans
While you may have a solid income and great credit, you may not qualify for an unsecured personal loan. As you’ll see, the standards that an applicant must meet for an unsecured loan are quite high. If you want to dive into an investment property and don’t qualify for an unsecured loan, then you will need to apply for a secured personal loan. There are a number of similarities between these two loans, but we’ll look at a few of the differences that set them apart.
- Cost Differentials – the starting annual percentage rate (APR) will likely be lower on a secured loan since you will have to put up some of your assets as collateral on the loan. With this additional commitment, lending institutions are more willing to lower the interest rate that you will pay over the course of the loan.
- Cases of Default – If you default on your loan — either you refuse to pay or can no longer make payments — then your lender has the right to seize whatever assets you put up as collateral without having to go to court. More than likely, however, you will be given an opportunity to bring your loan current before the lender places a lien on your assets.
- Ideal Borrowers – secured loans are best for applicants who have an average to poor rating on their credit score, or who don’t qualify for an unsecured loan. While a secured loan may be offered to you, consider carefully what assets you place as collateral— don’t risk the vehicle that takes you to work.
- Where to Apply – since secured personal loans are less common than unsecured loans, you can expect to find banks, credit unions, and a few online lenders that will offer secured loans if they are backed with a savings account or CDs (certificate of deposit).
Unsecured Personal Loans
Unsecured loans are loans that are approved without the need for any type of collateral. These are generally offered to applicants with a great credit history and income. If a borrower were to stop making payments, then the lender would be at a loss to take any physical assets to cover the loan. After reading that, you may be asking yourself why everyone doesn’t pursue that option? There are a number of reasons, which we will look at briefly:
- Cost Differentials – the annual percentage rate (APR) will likely be higher than the one you receive on a secured loan precisely because there are no assets which the creditor can seize if you were to default on your loan.
- Cases of Default – while you did not put any assets up as collateral on the loan, this doesn’t mean that there are no consequences for not fulfilling your loan obligations. In fact, you will have a tarnished credit score and face potential collections.
- Ideal Borrowers – unsecured loans are best for those applicants who have an excellent credit score and don’t want to risk losing an asset. Unsecured loans are frequently used for consolidating debt, financing home improvements, and other large purchases such as investment properties.
- Where to Apply – depending on your personal preferences, you can apply for an unsecured loan through online lenders, credit unions, and some banks. As we’ve said previously, the rates and terms will depend on your credit score and income.
At Apex Capital Group, we have seen many times how an investment property can richly benefit the investor. From wealth building to secure finances and more, investment properties are good opportunities that you should consider taking part in. As New Jersey’s number one provider of turn-key income properties, we have the experience and knowledge that you need to feel confident with each investment. Call now and see how investment properties can make a difference for you.