Secured loans are often a stepping stone, used to help you buy some of the most important things in your life. It is where a lender requires you to use a piece of property, an asset, or money as collateral in order to get funding. Some examples of a secured loan include:
▪️Home equity loans
Benefits of a Secured Loan
Risks of a Secured Loan
▪️Potentially lower interest rate: Since secured loans are tied to an asset or property, interest rates tend to be lower since there is less of a financial risk on the creditors side. Creditors feel confident they will get their money back, whether in the form of monthly repayments from you or the sale of the asset.
▪️Some tax deductions allowed: Some secured loans, like mortgages, will allow you to deduct from your taxes the interest you paid (up to a certain amount).
▪️Lower threshold to qualify: Since you’re putting up collateral, the barrier to qualify is lower. Instead of considering your credit score and history, it’s also taking into account what you’re using to secure the loan.
▪️Has the potential to lose assets: If you don’t make on-time payments every month, you could face losing your collateral, whether that is your home or car.
▪️Not as flexible for borrowing: Some unsecured loans, like personal loans, allow you to spend the borrowed money on whatever you’d like. Specific secured loans are generally tied to the collateral you’re putting up. For instance, a mortgage is tied to your home. Your auto loan is tied to the vehicle you’re buying.
If you’re having trouble paying back your secured loan, call us now to speak to one of our expert debt advisors. All of our advice is free of charge, impartial and 100% confidential.