Category: Loan Types

Types of Secured Loans you should know about

A secured loan can be a lot of help to those who are in a tight financial situation, but there are many different types that you will want to explore before deciding which you should go with. When you actually take the time to examine these options, you should be able to make the right overall decision.


A mortgage is a loan that is taken out for the specific purpose of purchasing a home or some sort of property. If the borrower fails to pay back the loan in full, the lender will foreclose on the property and sell it at auction. Mortgages are huge loans, so they tend to last anywhere from 15 to 30 years. The interest rate on these loans is usually just a few percentage points above the current prime rate set by the Federal Reserve.

The most common types of mortgages are fixed-rate and adjustable-rate. A fixed-rate mortgage has an interest rate that remains the same for the entire period of the loan, while an adjustable-rate mortgage has an interest rate that is subject to change. If you are interested in taking out a mortgage, you will need to be prepared to put down anywhere from 10 to 20 percent of the total value of the home you want to purchase.

Vehicle Loans

A vehicle loan uses the car that is being purchased as collateral, and it is repossessed if the person who takes out the loan cannot pay it back on time and in full. The lender charges interest on the borrowed amount just like with any type of loan. Lenders will always check applicants’ credit before making a final decision as to whether or not to approve them. Those who have poor credit can still get car loans, though the interest rate is usually much higher than it would have been with good credit.

CD and Savings-Secured Loans

These are loans that are secured by certificate of deposit or savings account funds, and they are often taken out by those who want to build their credit. If you don’t have much of a credit history or want to rebuild your credit because it is poor, this is an excellent option to consider. The bank places a hold on the funds in the account and provides a loan for up to 95 percent of CD or savings account funds. The lender will use the remaining 5 percent to recoup interest and collection costs in the event that the borrower defaults on the loan. If you take out this sort of loan, you will not be able to access the funds until the loan is repaid.

Title Loans

Title loans are short-term loans where the borrower uses their vehicle as collateral in the event that they cannot pay back the loan. The vehicle that is used as collateral must be in good condition though. The car must also have full coverage insurance. Lenders evaluate the vehicle for both cosmetic and mechanical issues, using vehicle pricing guides like Kelley Blue Book to determine its overall value. The amount of the loan is usually no higher than half the value of the vehicle so as to ensure the title loan company can recoup the loan and repossession costs if the borrower defaults. If you have a vehicle that is in good condition, this type of loan could be a great option for you.

Pawnbroker Loans

Pawnbroker loans are short-term and place a temporary lien on the proper of the borrower as collateral. Those who take out these loans typically use things like electronics, jewellery and musical instruments as collateral. The lender keeps the items that the borrower puts up as collateral if they are not able to pay the loan back on time.


The more you learn about the different types of secured loans there are, the more likely you will be to choose one that is right for you. Since there are so many of these loan options, you will definitely want to take the time to examine your options. If you are currently in need of a loan, this information can be extremely valuable to you.