What are secured loans? Secured loans are loans in which the bank or lending institution can be assured that they will receive back their money if the borrower is unable to make payments according to the specified schedule. Secured loans, then, are loans where the property of the borrower is held as collateral until the loan is completely repaid. Usually, with secured loans, the money is borrowed against the home or property of the borrower.
Secured loans are very popular with those who have a negative history of credit because secured loans are relatively reliable to the bank or lending institution. It is wise for any person to think carefully before applying for secured loans. Secured loans are considered risky because if secured loans are not paid on time, the borrower will most likely lose his or her house. Those skilled in the area of finances would typically advise a borrower to let secured loans be the final option if all other choices are not available.
Before applying for secured loans, it is probably wise to assess your individual needs. Is the money you plan to request the smallest amount you can borrow. Repayment plans for secured loans are typically spread out over a long period, and sometimes, they are paid in the same length of time that your mortgage is paid. Therefore, the smaller amount you borrow with secured loans, the better chance you have of being able to make payments on time, as well as pay smaller amounts of interest over the life of the loan.
Most secured loans include an option for something called a payment protection plan. This is an insurance policy that is linked with secured loans, and the premiums are added to the monthly payment for secured loans. In the case of some disaster, loss of work, or illness, the borrowers with payment protection plans on their secured loans do not need to repay the rest of their debts on that account. Some people feel that this is an excellent idea because it helps to prevent the loss of a home in case of an emergency. Others do not like it, seeing it as a waste of money, and they feel it is better to make regular monthly payments on their secured loans.
Secured loans are great ideas for consolidating debt, especially credit card debt. Rather than switching balances and juggling between cards and multiple monthly payments, a person can apply for secured loans and receive money to pay off all credit cards.
Who is eligible for secured loans. Most secured loans are dependent upon home as collateral, so it is suitable for secured loans usually means that you must be a homeowner. Unfortunately, secured loans are generally not available to those who are renting or leasing an apartment or house. Although automobiles can sometimes be used as collateral for loans, because of their depreciation and the fact that houses are worth much more in value, secured loans do not usually work with something like an automobile alone.