There are many different ways to go about getting a secured loan, and there is a secured loan to meet almost every financial need and position that might be faced in today's market. A secured loan is simply one that is backed by some form of collateral or asset (like a house, car, boat, coin collection, or even a bank CD). Which kind of loan you choose will depend on your reason for getting the loan, the interest rate you can secure, and the terms you are interested in having for paying back the loan.
A mortgage is one of the most common (and larger) types of secured loan. It is secured by a house or real estate. Because the assets can be easily converted if the loan is defaulted on, lenders offer a lower interest rate on these types of loans. These loans also tend to have a long repayment schedule which gives borrowers the ability to qualify for an even larger loan that they might otherwise be able to get.
Real property is another type of secured loan - like a boat loan or car loan. These loans are secured by the vehicle that is being purchased. Again, the interest rate is typically lower because the property can easily be converted if the loan is ever defaulted. Another plus for the lender is that unlike a home, the car or boat can be repossessed with out a lengthy legal entanglement.
An equity loan is a fixed rate secured loan that is secured by the equity in an existing property. Because it is second in line to a mortgage incase of default, the equity loan is often a little higher rate of interest and usually for a shorter term than most mortgages. This type of loan can be a good choice for consolidating higher interest loans (like credit cards and other types of high interest revolving credit).
An equity line of credit is another secured loan that is based on the existing equity in a home. It is a revolving credit with a variable rate of interest. Many consumers choose this type of loan when they are doing a remodeling project or other long term projects. It allows the borrower to take out just what they need when they need it. Because the interest rate is variable, this can be a risky choice during a time when interest rates are on the rise.
Personal loans can also be a secured loan. They are usually based on real property (like jewelry or artwork) or a CD (certified deposit) or even existing savings. Given the right interest rate, it could be beneficial to keep money in an interest baring account, and use a secured personal loan to make short term purchases or even take a vacation.
Getting a secured loan will be less expensive than other routes available for borrowing money. It usually takes a little more time because the lender has to verify the value of the assets used to secure the loan. In the end, the savings will be more than worth the added time.
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