Is a secured loan bad

Unsecured loans: loans without the need to provide collateral

In the case of banks, one can generally differentiate between two different types of loans, as an upper category, so to speak, before the loans themselves can be further divided into other categories. These two main categories of loans are firstly secured loans and secondly unsecured loans. If you want to determine which type of loan can be assigned to a particular loan, this is usually individual and cannot be easily generalized, as several factors are involved in the determination. So are the advantages and disadvantages that a secured loan or a blanket loan can bring.

What is a blank loan?

The best way to explain the unsecured loan is to distinguish it from the secured loan. Simply put, a blank loan is nothing more than a loan from a bank that is not secured. The loan is no longer secured in the case of a blank loan, which also means that the borrower does not have to provide any collateral such as guarantees or the like in order to receive the loan. Well, first and foremost every borrower dreams of not having to provide collateral for the loan - but this is exactly where the thing with the blank loan has to be put into perspective: Why should a bank not want collateral for the money that they give their customers gives? Simply because blank loans are usually only granted to two types of customers: Either these are customers with an excellent credit rating, with whom the bank can be sure that they can repay the loan, or the borrower's loan amount is so small that securing the loan would not be profitable for the bank, as this is always associated with costs.

A blank loan for everyone

A typical blanket loan that is made available to almost every borrower is the overdraft facility. As is well known, the overdraft facility is an overdraft of the account to a certain credit line that has been agreed with the bank. In the case of the overdraft facility, the bank does not secure the amount; it does not require any collateral. This is where a disadvantage of the unsecured loan comes into play: Although the banks do not provide collateral for the loan, the interest that is paid on the overdraft facility is also relatively high.

Is there an installment loan as a blank loan?

In principle: yes. But if you go from principle into practice, you have to look more closely at the matter of the installment loan as a blank loan. Whether the bank grants an installment loan as a blank loan depends primarily on the potential borrower. To be more precise, from his creditworthiness and the loan amount he would like to apply for. If you have a negative entry in the Schufa, you can actually forget the thing with the blank loan - the bank is then simply too risky and will demand possible collateral from the borrower.

Real estate loan as a blank loan

There is one more interesting thing about blank loans: real estate loans are sometimes also granted as blank loans. As is well known, real estate loans are characterized by their very high sum - why are they not secured? It is so that a large part of the loan amount of the real estate loan is secured by a land charge. However, the bank does not have the option of evaluating this land charge as security for the entire loan amount. In this respect, it may well be that 10-20 percent of the real estate loan is a blank loan.