How to Get a Secured Deal with Loans

Loan options are plenty for the ordinary borrower; but if you have a poor credit history, you may not be lent that huge sum you need for your luxury villa by the sea or that long-dreamt-of exotic holiday. Secured loans are the finest choice.

If you're planning to go for a loan to fund a major expense, you'll always be faced with various loan options; but here's when you'd stop to think which one to choose, because all loans would not suit your particular needs or situation. Every loan is gestated with the borrower's requirements, and therefore, think before making your loan choice.

While you're hunting for the perfect loan option, you'll often be faced with terms like 'secured' loan and 'unsecured' loan.

Unsecured loans are personal loans, student loans, personal lines of credit, etc. These are granted only after checking the borrower's credit history and analyzing repayment possibilities. These also have higher interest rates and allow a smaller total borrowing amount compared to secured loans.

The latter, as the name suggests, are secured in the sense that the lender would have security (assets like home, car) against the loan. For example, a mortgage loan is a secured loan where the collateral pledged is property/home. Unlike unsecured loans, secured loans naturally offer lower rates, higher borrowing amounts, and longer repayment terms - as the lender has 'security' (your assets) to fall back on in case you default on your payment.

Secured loans are best when you need a big sum to meet an expense, when you want to have an extended repayment period, or if you do not have a good enough credit history to get an unsecured loan. As there is collateral pledged here, lenders are more comfortable in lending the money to almost everyone. However, the borrower runs the risk of losing the property/car in case of a default.

Home improvement loans, home loans, home equity loans, auto loans, recreational vehicle loans, home equity lines of credit, etc. are some common secured loans. The loan amount, the terms, and the annual percentage rate (APR) for secured loans depend on the value of the property, the borrower's ability to repay the loan, and his situation. The supreme advantages of secured loans are:


Lower payments per month

Lower interest

Higher borrowing capacity

Longer repayment terms (up to 25 years)

Although in secured loans you stand a chance of losing your home/car if you fail to meet the terms and conditions, it is definitely a secured deal when it comes to loans, because you have more benefits here than in ordinary personal loans. However, you must bear in mind that secured loans, like all others, are subject to market forces and competition. Therefore, rates keep changing from provider to provider.