On Tue, 25 Mar 2008 08:00:21 GMT, Mike_B
wrote:
>In message <0rbgu35mbnm20jn4tcm9gbq36a4dont8uf@4ax.com>, John Anderton
> writes
>>
>>An unsecured loan represents a greater risk to the bank and therefore
>>attracts a higher rate because :
>>
>>a) It will cost more to reclaim the debt by gaining access to the
>>customer's assets than for a secured loan
>
>In what way will it cost more? The few quid application costs for a
>court judgement and charging order versus the secured loan application
>costs for a possession order are not all that different.
Yes, it will be different, i.e. more
>
>>b) There will always be some customers who have no assets when they
>>default and so the bank won't get any money back, which won't happen
>>with a secured loan.
>
>We aren't talking about people with no assets, as their property
>wouldn't be at risk anyway.
We are talking about the rate if interest for unsecured loans which
has to take into account those people who have no assets. The fact
that, in this case, the customer has assets is largely irrelevant to
the overall interest rate being charged.
It *is* however relevant to the wisdom of taking out an unsecured loan
and therefore paying higher rates when you could take out a secured
loan and pay lower rates,
Cheers,
John |