A secured loan is any loan that requires the borrower to provide collateral. The most common forms of secured loans would be auto loans, title loans, mortgages, secured credit cards, and pawn shop loans. Essentially, if the lender requires you to offer up some sort of collateral to get the loan, it’s a secured loan.
If a borrower is unable to repay the loan, the lender will keep and/or sell the collateral to make their money back. This may reduce the lender’s overall risk, but it increases the risk for the borrower. Taking out a secured loan means running the risk that you’ll lose your collateral, which in some cases may be a vehicle or home.
Secured loans work the same way as many other types of loans when it comes to the application, approval, funding, and repayment process. The key difference is that you won’t be approved unless you offer up the appropriate collateral. It may even be easier to secure one of these loans, since the lender has the added insurance of collateral. Many borrowers with low credit scores opt for secured loans for this very reason.
If you currently have a poor credit score and need some quick cash, a secured loan might be a decent option. But it’s important to make sure you find the right one for your situation, as there are several secured loan options available. Be sure to read all of the terms and conditions, carefully review the loan agreement, and reach out to the lender to ask questions.
At CreditNinja, we have all the information you’ll need to make a smart financial decision. Learn more about secured loans, how they work, and what to expect when applying for one, right here in the CreditNinja Dojo!
