What is a secured loan?
There are many different terms you might meet before getting a loan. Today we will cover what you need to know about secured loans in a short and understandable way.
A secured loan is a loan that is backed by an asset also known as a collateral. The collateral can be used as a payment if the borrower fails to repay the loan in time.
Secured loans typically have a lower interest rate, because they are a safer way for a creditor to lend money out.
Example of a secured loan
An example of a common secured loan could be a mortgage or home loan where the property is used as collateral.
Another example of a secured loan could be a car loan or vehicle loan, where the car is used as collateral.
Are online personal loans secured?
Most online loans however are unsecured loans meaning that there is no asset used as collateral. Secured loans are usually used for bigger amounts such as buying a car or a home.
Usually the process of getting a secured loan is also slower compared to an unsecured online loan, because you will usually have to deal with more paperwork.