Forbrukslån: Types of Consumer Loans


Have you ever wanted to get something so bad but was unable to just because you couldn’t afford it? Have there been times you thought an extra five thousand or even one thousand dollars would have gotten you out of a tight situation? Maybe you would have been able to get that car or house you had dreamed about for so long if you had succeeded in making the required down payment. 

If you’ve experienced any situation that could easily have been taken care of with extra cash in your account, you’re not alone. Truth be told, there are lots of other people who have found themselves in these tight spots, and quite often, many of these problems have been sorted out with a timely loan. 

Life is unpredictable and while we may do our best to prepare for any possible emergency, we are rarely ever prepared for what life throws at us. Now, there are difficult situations that cannot be taken care of with money, but the truth is that a lot of emergencies can be put to rest with money. 

Talk about an emergency surgery, a limited-time offer that could make your life so much better at that specific time, a damaged roof from a storm; you get the point. Handling most emergencies would be a breeze if money weren’t a problem, and while we’d all want that, it isn’t always the case.

However, loans exist because of events like these that we are often not prepared. No doubt, consumers have not only been able to get out of uncomfortable or embarrassing situations with the help of a loan, but they’ve also been used to save lives! This means in some sense; a loan can be considered a lifesaver. 

Consumer Loans

Consumer loans are credits or advances made to a consumer by a creditor. Depending on the type of loan, they can be used to make any kind of purchase or be used for specific expenditures. Consumer credits can be secured or unsecured. Common examples include credit cards, mortgages, small business, auto, personal, and student loans. 

Unsecured Loans

Unsecured loans are credits that are not backed by collateral, however, there are several rigorous requirements that consumers must meet before they can qualify for them. One may begin to ponder how lenders of unsecured loans recover their money when a consumer defaults. Well, since there are no collaterals to liquidate in the event of a default, their only option is initiating a lawsuit. 

Lenders are aware of the high risks that come with a loan like this and there are several precautions they take to mitigate these risks. First, and probably the most important is the borrower’s credit score and history. Since a borrower’s promise to pay back doesn’t really guarantee much, the lender makes their decision after carefully examining the consumer’s credit score and history. 

Also, because of the higher risks creditors are exposed to, unsecured credits tend to have higher rates attached to them. These rates are often way higher than secured loans and as a result, unsecured credits are provided to only the most credit-worthy consumers. Credit cards, personal loans, and personal lines of credit are all common examples of unsecured credits. You can go to billigeforbrukslå to learn how to access affordable loans.

Pros and Cons of Unsecured Loans


  • Consumers with an impeccable financial record, sizeable income, and credit score that meet the eligibility criteria for these types of advances have a wide range of potential lenders to borrow from. 
  • Since no collateral is required to take out an unsecured loan, consumers won’t lose an asset if they default on their payment. 
  • Application for credits like this is usually less time-demanding and stressful like secured credits. A customer could simply fill out the application form on the website of the lending institution and wait for approval which in most cases will come before 24 hours. Once the application is approved, the required funds are transferred immediately into the account that was attached to the application. 


  • Loan amounts are typically smaller than secured credits. This is because the absence of collateral means that lenders are exposed to a much higher risk of losing their money if a borrower defaults. So, as part of the effort to lower this risk, lenders generally give out smaller amounts. 
  • Loan terms are generally shorter.
  • Rates are higher.
  • Eligibility requirements for unsecured credits are on the high side since lenders are exposed to higher risks. Therefore, these advances are only given to customers whose credit score and history suggest beyond any doubt, that they are capable of repaying the loan. 

Secured Loans

Unlike unsecured loans, as you may have already guessed, these are secured with an asset or group of assets, also known as collateral. Lenders of this type require consumers to provide collateral that can be liquidated at any time if the consumer fails to repay the loan. 

Institutions that give out secured credits are exposed to significantly less risks than those that offer unsecured credits. This is because they have an easier way of recovering funds in the event of a default. This is unlike the opposite type where the lender may likely spend even more funds following the recovery process legally. 

As a matter of fact, with advances that are backed by collateral, especially landed property, a lender may get more than the owed amount when the property is liquidated. The value of real estate generally appreciates over time, and since secured loans typically have longer repayment periods, the value of the asset may have appreciated at the expiration of the loan term. 

So, when a lender liquidates the asset in the event of a default, there’s a big chance that they make a sizeable profit while recovering the owed funds. 


Pros and Cons of Secured Loans


  • Qualifying for this loan is easy.
  • Loan amounts are huge and can run into tens and sometimes hundreds of millions. 
  • Interest on secured loans is lower than those that are unsecured. 


  • Consumers risk losing their assets if they default on their payment. 
  • Since the loan term is usually long, chances are that a borrower will pay more in interest over time. 
  • Some may have an expensive arrangement or origination fees, and other costs that when considered may make taking out the loan a not so prudent financial move. These costs should be included in the Annual Percentage Rate of Charge (APRC), so, be sure to check that. 

Examples of Consumer Loans

Earlier, we mentioned some examples of consumer loans. Now, it’s time to examine a few of them. 


Consumers use mortgages to finance the purchase of a home. It’s a fact that most homes cost more than what an average consumer makes in a year and that is why mortgages were put in place. They are designed to help people purchase homes by spreading out the cost over a specific period. 

The 30-year fixed-rate mortgage is the most common type of mortgage. Once taken out, the homeowner makes a monthly payment of a fixed amount over the lifespan of the loan. Other mortgage plans like the 15-year and 20-year plans also exist, however, they are far less common since their monthly payment is significantly higher than the 30-year plan. 

Student Loans

Most students that take out a loan to finance their education take out federal student loans because they can be repaid a few months after graduation and interest rates are fixed. Federal student loans can be divided into two main groups, which are subsidized and unsubsidized loans

The former is meant for students with the most financial need and the government pays the interest while the student is still in school. Visit to learn more. 


The decision to take out any one of the two types of consume loans should be made after careful consideration of your financial situation, and reason for the loan. For minor issues that do not require too much money to be taken care of, taking an unsecured loan may be a better choice to make. But for bigger projects like expanding a business, an asset-backed loan should be helpful since you can borrow larger amounts.