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| What is a Secured Loan?
Secured Loan is a loan which has a collateral put up for it. This means if the customer defaults on his payments then the creditor seizes the collateral and sells it to recover the money which was borrowed. Usually secured loans have a lower interest rates because it has collateral, the unsecured loans have a higher rate because the only thing backing up the loan is the customers word.
For example your taking out a loan you have two options secure or unsecured, if you choose secure then the interest rate will be lower but you have to put up as collateral your house or car. This means that if your missing out on your payments then the creditor will take your collateral and sell it to cover the loan. Now if you choose the unsecured one then you have to pay more interest but you won’t end up in the position of loosing your house if you miss your payments. | | | | |
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