What Is A Secured Loan or Home Loan?

What Is A Secured Loan or Home Loan?

It is collateral the person pledges to secure his or her debt to the lender. This debt might be in the form of a car, house, or some other form of property. You are pledging this as your promise to pay back the loan, fully and completely, including interest.

Types of Secured Loans

There are many types of secured loans people try to get. Some of them include the following:

1) A home Loan-This is when you put your home up as collateral. Miss any payment and lender or company can foreclose on it.

2) A car loan-This one works the same as the home loan. The car can be repossessed as soon as you default on one payment.

3) A credit cards-The banks usually require some kind of deposit against the limit. That is their way of verifying you will pay back the full loan.

4) A title loan--This is when you use a vehicle that is paid-in-full as collateral. The rates will be high for this one, so watch out.

The Benefits

Yes, there are a few. Those who have been denied an unsecured loan, in the past, can be eligible for this type of loan. It does help to build your credit score and other things of that nature. There is less risk involved, for banks. The rates are usually lower.

The Cons of A Secured Loan

Just like anything else in life, there are drawbacks to this. You can take on too much debt with this type of loan. You can be in danger of losing the collateral you put up. Those who choose to do this are advised to pay the loan off ASAP.