Did you know that the outstanding debt for personal loans in the United States falls at $143 billion? No one likes taking out personal loans. But, for many people, they are the only way they can afford certain expenses.
If you want to avoid the high interest that often accompanies unsecured personal loans, then go with secured loans. These are loans that require you to put up something as collateral in exchange for lower interest rates.
But, what are the different types of secured loans? In this secured loan guide, we’ll walk you through some of the popular types. Let’s get started!
A mortgage loan allows you to use your home as collateral. Since there is a lot of value in your home, you can usually get low-interest rates, which makes it one of the best secured loans.
But, if you miss a payment, then the lender can foreclose on your home.
Have you not paid off your mortgage yet? If you haven’t, then you can still borrow using any equity you put into it. This is known as a HELOC, or a home equity line of credit. It’s similar to a credit card.
But, you get higher spending limits. You also risk losing your home and any equity you have in it if you default.
Car Loan or Car Title Loan
With a car loan, you use your vehicle as collateral. If you miss a payment, then the bank will repossess your vehicle to recoup any losses on the loan. This type of loan is similar to a car title loan.
The difference is that with this loan, you give your car title to the lender until the loan is paid back. If you want to learn more about this type of loan, make sure to check out fastaction.ca.
Secured Credit Card
Secured credit cards require a cash deposit before you can get one. Typically, this amount is between $50 to $300. The deposit serves as both your collateral and your credit limit.
So, the more money you put into it, the higher your credit limit can be. If you have no credit history, then this is a great way to build credit.
With a pawnshop loan, you offer the establishment a valuable item in exchange for a lump sum of money.
If you aren’t able to make a payment on the loan, then the shop will sell the item you gave them to make up for any losses.
Enjoy Learning About the Types of Secured Loans? Keep Reading
We hope this article helped you learn more about the different types of secured loans. The right type of secured loan for you depends on what assets you have at your disposal.
But, regardless of which one your choose, you need to make sure you can pay it back on time. Otherwise, you stand to lose whatever asset you put up as collateral. Do you not want this article to end?
We don’t blame you. Luckily, there are hundreds more that you can check out by continuing to explore our site. So, get started!