What Is a Secured Loan?

What Is a Secured Loan?

What exactly is a secured loan? Is it safe? Well, a secured loan means exactly that, secured. The secured part means that you use collateral to secure it. Examples of collateral can include material like your car or your home depending on the amount you are requesting. Secured loans are also secured by your job because the lendor will be gauranteed payment knowing that you have a good job with disposable income greater than the amount requested. Secured loans are safe as long as you make your payments as promised. If not you can expect a lawsuit or judgement against you. If you base your loan on your job and you fail to maintain your payment schedule you can receive wage garnishments.

Secured loans are usually sought because of their low rate of interest. So many people use them to pay off their credit cards. Consumers can also obtain them a lot easier than unsecured loans too because of their low risk to the lendors that offer them. So, if you know that your credit is lower than you would like, you can rest assured that your chances of receiving a secured loan are high. But remember, your secured loan is based on the collateral that you both use and are willing to lose if you run into trouble in the future.

Another thing to keep in mind is not to ask for more than you can pay back. Using a calculator that figures loan amounts and payments is a great tool to have. Then, you'll have a clear idea of how much your payments per month will be including interest.

Lastly, don't just decide on the first lendor you come across. Do your homework to determine the best lendor for your needs. Making simple phone calls to bank and credit unions and asking what their rates are will make your entire decision process that much more easier.