Secured loans are typically utilized when financing larger purchases. A secured loan is reliant upon the borrower providing ‘collateral’ as security for repayment. For instance, home equity loans are a very common type of secured loan. In order to achieve approval for your home equity loan, you are going to be required to provide the lender rights to your home as collateral (your mortgage is written against the loan). Similar to an auto loan with the vehicle being the collateral. If you default on your home equity loan, the lender will take possession of your home. If you default on your auto loan, you will lose your car.
Secured loans typically have higher borrowing amounts in conjunction with longer terms for loan repayment than unsecured personal loans.
As the name of the loan suggests, secured loans offer ‘security’ that you are going to repay your loan based on the agreed upon conditions and terms. As indicated above, it is important to note that the property you put up as collateral will be repossessed in the event you are unable to make payments and default.