Loans are one of the most commonly used financial solutions to meet various needs, from consumptive purposes to productive needs like business capital. In practice, there are various types of loans offered by financial institutions. One of the most popular types is secured loans. Here are the types of lending institutions and the advantages of secured loans summarized by the BFI Finance team for you.
1. Types of Lending Institutions
Before diving deeper into the advantages of secured loans, let’s first explore the types of financial institutions offering loan facilities.
1.1 Banks
Banks are the most well-known financial institutions among the public. Banks offer various types of loans, both secured and unsecured. Loans from banks often come with strict requirements and lengthy verification processes.
Additionally, banks provide a variety of loan products such as Multi-Purpose Loans, Home Ownership Loans (KPR), and Vehicle Loans (KKB). Typically, banks require comprehensive documentation like salary slips, tax identification numbers (NPWP), and bank statements.
1.2 Financial Technology Institutions (Fintech)
Financial Technology (Fintech) refers to innovations in finance utilizing digital technology. Fintech companies offer unsecured loans with fast and easy processes, usually through apps or online platforms.
Fintech’s main advantage lies in its accessibility. Borrowers only need to download an app, upload identification documents, and wait for a verification process that often takes just minutes to hours. However, fintech loans tend to have higher interest rates and shorter repayment periods, making them ideal for those in urgent need of small to medium-sized funds.
1.3 Non-Bank Financial Institutions
Non-bank financial institutions include finance companies, cooperatives, pawnshops, and other financing entities that also offer secured loans. These loans are often more flexible than bank loans, with easier requirements and quicker processes.
Savings and loan cooperatives, for example, are often a choice for rural communities or specific groups. Pawnshops are also very popular in Indonesia, especially for loans secured by gold, electronics, or other valuable items.
Other financing entities, such as finance companies, are widely used for vehicle and heavy equipment financing with relatively straightforward processes without compromising on quality. One example of such an institution is BFI Finance, known for providing financing or loans for various needs with a range of collateral, from vehicle ownership documents (BPKB) to house or shop certificates.
2. Advantages of Secured Loans Compared to Other Loans
Secured loans offer several benefits that you may want to consider. Here are the top five advantages of secured loans, as reported by DetikFinance:
2.1 Lower Interest Rates
One of the main advantages of secured loans is their lower interest rates compared to unsecured loans. The reduced risk for lenders due to the collateral provided allows them to offer more competitive rates.
These competitive rates are a great help for borrowers in financial planning. Monthly installment payments become more manageable, allowing borrowers to allocate their funds for other needs. Moreover, lower interest rates reduce the total cost of the loan in the long term, making it more economical than unsecured loans.
2.2 Longer Loan Terms
Another advantage of secured loans is the longer repayment periods. Longer loan terms provide borrowers with flexibility to manage their installment payments according to their financial capabilities.
With extended loan terms, borrowers are not burdened with large installments in a short time. This is especially beneficial for those with a steady monthly income. Longer terms also allow borrowers to plan the use of funds more effectively, whether for investment or business development.
2.3 Higher Loan Limits
Secured loans also offer higher loan limits. The loan amount can be adjusted based on the value of the collateral, enabling borrowers to secure more significant funds.
The substantial loan limits are ideal for those needing large funds for purposes such as business, home renovation, or asset purchases. Additionally, higher limits open up opportunities for broader use of funds, such as working capital or business expansion.
2.4 Faster Approval Process
Although collateral document verification is required, the approval process for secured loans is often quicker, especially if the provided collateral has high value and clear legality.
This fast process benefits those in urgent need of funds.
2.5 Improved Credit and Financial Profile
Applying for a secured loan and paying installments on time can improve the borrower’s credit score. A good payment history helps build a positive financial reputation, making it easier to access other loans in the future. With a strong credit profile, borrowers can receive better loan offers from various financial institutions.
Secured loans require borrowers to provide assets as collateral, such as house certificates or vehicle ownership documents (BPKB). Collateral gives financial institutions confidence in case of default, enabling them to offer larger loan amounts and longer repayment periods.
One institution known for providing secured loans is BFI Finance. With various product options, such as loans secured by motorcycle BPKB, car BPKB, and house or shop certificates, BFI Finance offers quick application processes, competitive interest rates, and long repayment terms.
Choosing the right type of loan depends greatly on individual needs and financial conditions. If you have assets that can be used as collateral, secured loans at BFI Finance can be the best option to meet your financial needs. BFI Finance is licensed and supervised by the Financial Services Authority (OJK).
Let’s apply for your financing at BFI Finance today without hesitation!
#SelaluAdaJalan with BFI Finance.
