Secured Loans
Tuesday, January 11, 2011
A secured loan relieves the lender of financial risk involved with lending you the money and you can usually get a loan with better terms and interest rates than if you were trying to get an unsecured loan. In other words, collateral is not only protection for the lender but a good way for you to get better rates and conditions on the money you are borrowing.
A secured loan is usually easy to obtain if you are a homeowner. The lender will determine the maximum amount you are able to borrow based on your property value. If you are a home owner or own other property but have bad credit, then a lender will use the value of your property to lend you the money even though you have a poor credit rating. This will minimize the risk the lender is taking to loan you the money and help rebuild your credit rating - if you comply with the payment terms and conditions. Most lending companies are careful about lending money to people with poor credit ratings but will be open to lending money if it is secured.
You can get a secured loan according to your needs. You can get a specific loan for home improvement, vacations, car or emergencies. There are also secured consolidation loans available for people who need to combine multiple debts into a single consolidated loan to make payment terms and conditions easier to manage.
There are different levels of financial security you should understand before finalizing your loan. They include:
Non-Recourse Loans
This is a secured loan that requires you to provide collateral to secure the loan provided by the lender. The lender will take the collateral if you default on your loan. The security only extends up to the value of the collateral. If you miss any payments the lender can seize your collateral to recover the balance due.
Mortgage Loans
Mortgage loans are always secured by the property the loan was made against. If you default on your mortgage payments the lender will secure the property to satisfy the debt.
Foreclosures
A foreclosure is not usually viewed as a secured loan for the average person but is a legal process that involves the sale of property to secure a debt owed by the borrower to the lender.
Repossession
Repossession is similar to a foreclosure but usually on a loan other than a mortgage for property. This is usually in the form of a vehicle or other tangible goods used as collateral for a loan that you have defaulted on and the lender is seeking full payment for the debt.
