One of the most popular types of consumer loans is a secured loan or secured personal loan. A secured loan means that the loan is backed or secured by an asset that is in your possession, for example, a home or a car. In the event that you are unable to repay the loan, the lender will take possession of the asset you secured the loan with.
The other common consumer loan is an unsecured loan. As the name suggests, this type of loan has no collateral or asset attached to it. This means that in the event of a default by the borrower, the only course of action the lender has is to take them to the court to try to recover their monies.
Secured loans are an affordable way for people to fulfil a range of desires, whether it is to renovate their homes, buy a new car, go on a vacation or simply cover bills or medical costs. Due to the low risk nature of the loan for the lenders, most will not ask borrowers to disclose what they will be using the loan for. So, you have free rein to spend the money on whatever you want. Secured loans are also a way for people with less than perfect credit to qualify for a loan that they otherwise would not and that at reasonable rates.
Also, compared to unsecured loans, secured loans tend to carry lower interest rates and can be longer in the repayment terms, simply because the lending institution feels more secure with the collateral in place. Nowadays it is not only banks that offer competitive rates on secured loans. There are many non-banking financial institutions, such as insurers and credit card companies that can provide very competitive rates on secured loans. In fact, many lenders now provide easy and quick access to loans through the internet, where applications can be made confidentially directly online.