Disadvantages of Secured Loans.
Every thing possess both advantages and disadvantages. Secured loans also posses limited disadvantages. Some of the highlighted are as follows:
- Possession OF Real Assets. There is compulsion of possessing the real asset by the debtor. Without the collateral there is no way of obtaining secured loan. The collateral also should be real no any perishable assets are taken as collateral by the creditors.
- Proper Estimation is required. Before the loan is being taken there should be proper estimation of loans amount. It is required because the creditor provides less the amount that the collateral(assets) posses in the maturity of loans so by improper use of loan may transfer the collateral(assets) to creditor. This posses high loss to debtor.
- High risk. Unsecured loan provides high risk in the case of debtor. If due to some unexpected reason the debtor is default then the collateral which possess high value as compared to loan is transfer to creditor's hand with bonafide title.
- Restrictions. The creditors can impose various restrictions to debtor in case of collateral like car, houses,and so on.
Posted by Prakash
on 2:45 AM
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