Secured Loans: a Straightforward Explanation

By: Sheldon Amerson

Secured loans are loans that are backed up by some type of collateral. For instance, a borrower may be granted a cash loan based on the value of assets held, such as automobiles, homes, stocks, bonds, gold or the like. The lender will hold the titles to said assets until such time that the loan plus applied interest is paid off in full.

Secured loans are basically the most straightforward method to acquire sums of cash quickly. Lenders are not likely to loan money based solely on your word to repay. Putting your valuable assets on the line is a fairly safe guarantee to them that you will repay the loan on time.

Equity loans are also considered secured loans as the lender has the right to lien your home in the event of non-payment. Secured loans are always granted at a lesser value than the assets being put up for them. The lender will assure their winning position in the event of failure to pay; they will either benefit from interest charged or from seizure of your assets that are more valuable than the loan amount to begin with.

Debt consolidation loans are often secured as well. The lender pays off your other creditors, eliminating multiple interest-charging payments in exchange for one singular payment with (usually) lower interest applied. A debt consolidation loan normally lowers the monthly payment amount as well.

Secured loans are a great alternative to other types of loans for those with questionable credit histories. Because of the fact that your assets are held in lieu of the less valuable loan in case of default, your credit score ceases to matter as much.

In searching for a secured loan lender, follow the general rules of business: shop around and compare different lenders; get everything in writing; and take your time in making the decision on terms that you accept. Don't let the thought of a sum of cash now make you suffer later.

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