What is a Secured Loan?
{ Posted on Mar 31 2009 by SecuredLoansAdvisor }
A Secured loan is a type of loan that is protected by the borrower’s assets, that can be a house, a car, etc. Those assets now secure the loan as “collateral” or guarantee, in the case that the borrower cannot comply with the loan, the creditor will take possession of such collateral. Secured loans can have many uses, can be used in personal loans, business loans and commercial loans.
Secured loans are much cheaper that unsecured loans, and the reason is obvious, they offer collateral that may be used to cover the debt. On the other side, unsecured loans tend to be more expensive because they lack of any collateral or personal assets.
What are the benefits?
- Lower cost when compared to unsecured loans
- Longer repayment terms
- Usually offers very attractive interest rates
- Offer larger amounts of funds
What are the cons?
- The risk of losing your personal property or assets
- In this economy, secured loans are more complicated to obtain
- The funding process tends to be much longer (depends on the loan type)
- Requires large quantities of paperwork
Types of Secured Loans
There are many types of secured loans, the following are just the most common ones:
- Mortgage loans are a type of secured loan use to buy property, like a new or used house.
- Debt consolidation loans are used to consolidate someone’s debt into 1 bill
- Business loans can be used for many purposes and may uses the business owner’s assets as collateral