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Two of your biggest expenses upon leaving school may be your educa–
tion and your vehicle. Of course, we're all excited when we think about
owning our first car, right? We think about independence, going to
places without having to wait on a ride, taking someone out on a date,
or even doing the grocery shopping for mum and dad once in a while!
Most times, we may not have all the cash upfront to make such a large
payment all at once. Understand this: a car is not a cheap item! This is
when we may make a decision to get a loan. There are two types of
loans: secured and unsecured loans.
SECURED LOAN:
A secured loan is backed by collateral (something
of value that can be taken away
if
you you don't pay on time.) A car
loan is a secured loan, since the car itself can be used as collateral. So,
if you don't pay your instalments, the financial institution can simply
take back the car!
UNSECURED LOAN:
This is a loan where the lender takes more risk
in lending you money, since there is nothing to take, if you default on
the loan. Therefore, the interest rates in this type of loan are much
higher. With higher interest rates, it is more expensive for you to
borrow. A student loan is an example of an unsecured loan.
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