What Is A Secured Loan?

Banks or other financial institutions usually offer secured loans. They are designed to provide short-term credit to individuals who don’t qualify for conventional bank loans.

A secured loan is a type of loan where you pledge something of value (such as a car) as security against the loan. The lender has the option to repossess the item if you fail to repay the loan.

The Basics Of Secured Loans

There are two main categories of loans based on their requirements – unsecured and secured. An unsecured loan can be given out without additional proof from the borrowers. On the other hand, secured loans require collateral of some sort.

Here are some of the primary secured loans available: 

– Mortgages – Vehicle loans – Home loans, etc.

Pros Of Secured Loans

- A poor credit score is accepted - Bigger loans - Better interest rates - Longer loan periods - Improved credit history

Cons Of Secured Loans

The biggest disadvantage of secured loans is often you cannot change the terms of the loan once you’ve signed them. This means that you may find yourself locked into a bad deal for years.

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