Have you heard of secured versus unsecured lines of credit?” “Credit” according to Experian is, “the ability to borrow money or access goods or services with the understanding that you’ll pay later.” Working to increase your credit and provide your positive payment history can play a vital role if you plan to borrow money. If you are trying to make the decision between secured or unsecured lines of credit, your payment history can impact your options, but so can working with a great real estate financial team, like Pacific Shore Capital.
The differences between a secured line of credit versus an unsecured line of credit are outlined below but we want to emphasize and encourage you to get connected to real estate financing professionals, like Pacific Shore Capital. Our extremely talented team has a combined three decades of experience in commercial and multifamily financing and can answer the questions you have catered to your financial goals.
What is a Secured Line of Credit?
A secured line of credit is where the borrower guarantees it with collateral or assets of their own. Collateral is an asset and can include a car or home. Borrowers offer up collateral as a way to qualify for a particular loan and can help influence lenders on their ability to repay. Since collateral protects lenders’ financial stake if the borrower fails to repay the loan in full, it is important to make lenders comfortable extending credit. Secured credit lines can come with a lower interest rate than unsecured credit lines. If the borrower goes into default, the lender can seize the collateral.
What is an Unsecured Line of Credit?
A credit card can be an example of an unsecured line of credit and is also why they tend to have high-interest rates. If the borrower goes into default, the credit card company has no secured compensation to seize. An unsecured line of credit is where the borrower does not guarantee the credit with any assets. The lender takes on a greater risk by granting an unsecured line of credit. This line of credit is riskier for lenders and can sometimes come with a higher interest rate due to that risk. Because this is an “unsecured line of credit,” the borrower has no assets subject to being lost if the loan goes into default. It is important to work with great real estate financing professionals like Pacific Shore Capital to help you if you are looking for an unsecured line of credit.
Top Four Secured Lines of Credit Versus Unsecured Lines Takeaways:
- Work With the Best – Why not work with great real estate financing professionals, like Pacific Shore Capital to make sure you are getting individualized lending and set up to succeed. When it comes to making financial decisions, it is the most important decision to work with a team that has earned your trust. Don’t shy away from spending some time getting to know the people you are trusting with your financial decisions.
- Do Your Credit Work – Work to increase your credit one month at a time and provide positive payment history. Your credit plays a vital role if you plan to be a borrower. The lender is ultimately taking a risk on you. Having good credit shows the lender you are serious.
- Unsecured Means No Collateral – An unsecured line of credit is not guaranteed by any asset or collateral. If the borrower goes into default, the lender has no secured compensation to seize. The lender takes on a greater risk by granting an unsecured line of credit with no collateral to seize upon default. An unsecured credit line can come with higher interest rates because it brings a higher risk for lenders.
- Secured Means Collateral – A secured line of credit is guaranteed by assets or collateral.
The bottom line with unsecured versus secured lines of credit comes down to credit, collateral, and who you work with. Continue each month, not overspending, and make the right payments to earn you greater credit in the future. Financial reliability is what lenders are looking for and is within reach if we stay financially disciplined.
Pacific Shore Capital is San Diego’s boutique real estate financing firm. Our small and extremely talented team has a combined three decades of experience in commercial and multifamily financing. We specialize in arranging the most favorable financing solutions by analyzing your needs and recommending the most beneficial, cost-effective course of action. Clients say we’re “the best-kept secret in commercial finance” and we want the secret to get out! We’ve had the privilege of originating every aspect of commercial real estate property types. Our close, long-standing lender relationships coupled with our knowledge of the current factors affecting your local market give us the expertise needed to guide you to make the best investment decisions for your specific situation.
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