Any type of material goods like money, property, or car which is given to another party with an agreement for future repayment along with interest is called a loan. In simple terms, when someone borrows something and agrees to return it in the future with an additional charge or interest, it is called a loan. Several factors can be used to differentiate between loans.
What is the difference between a secured and unsecured loan?
The loan which is backed by collateral such as, car loans and mortgages are called secured loans. The loans which are not backed by any collateral such as, credit cards and personal loans are called unsecured loans.
Unsecured loans have higher interest rates as compared to secured ones because they are riskier for the lender. In case of default, the Money Lender Singapore can repossess the collateral if the loan is secured but in case of an unsecured loan, it is not possible.
The difference between revolving and term loan
A loan in which you can spend a loan, repay it and then spend it again is revolving loan. For example, a credit card is an unsecured revolving loan and a home-equity line of credit (HELOC) is a secured revolving loan. A term loan is in which you have to pay equal monthly installments over a set period. For example, a personal loan is an unsecured term loan and a car loan is a secured term loan. To apply for a personal loan you can just go to https://cashlender.sg/ or you can search for Money Lender Singapore or Fast Loan Singapore and click on the crawfort’s website to apply.
What is the difference between simple interest and compound interest?
There are two types of interest rates which can be applied on a loan, a simple interest or a compound interest. Simple interest is an interest which applies to principal loan, which banks normally charge. For example, you borrowed an amount of $100,000 at a simple interest of 15% per annum. So, in the end, all you have to pay is the total amount of loan plus interest which is $100,000 X 1.25 = $125,000.
However, in compound interest, you have to pay interest for not only the principal amount but also for the accumulated interest of previous periods. For example, at the end of the first year, you have to pay the principal amount plus interest on the principal amount but at the end of the second year, you have to pay the principal amount plus interest on principal amount and interest on the interest of first-year principal amount.