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Secured loans : These loans are less risky to lenders

Secured means which are fastened with something. So as loans, secured loan term itself tells the meaning that a loan which is secured by some valuable thing like gold, property or vehicle. In other words, your borrowed money will be secured against collateral that can be anything as per your loan type.

To take any loan, you must have proper awareness about its terms and policies. Same with the secured loans, you must know that on which asset you are borrowing money and what consequences may occur if you get failed to repay.

secured loans online

secured loans online

These loans are less risky to lenders as they can possess your collateral in case you don’t pay off your debt amount with interest. If you are in need of a high amount then this would be the best option to choose because these are long-term loans. You can put anything as an asset that can be easily converted into cash. And the loan amount varies with the market value of that thing.

Here are a few examples of collateral that you can use:

  • Automobiles
  • Valuable metals like gold
  • Any big machines
  • Property like Home, Land
  • Insurance policies

On what facts, Online payday loans ohio lender decide the amount for the loan? Of course, on the utility of collateral the limit of your loan will be decided. Usually, it is a bit less than the value of your asset because it can be declined after a few years. So, do not get any loss in the case of default payment, lenders offer quite less what the actual value of that thing is.

Classification of Secured loans:

  1. Mortgage loan: Loans that are borrowed to build or buy a new house that is secured by that same property. You’ll need to pay your debt in monthly installments until the whole loan is repaid. Its term is between 15 years to 30 years with a fixed rate of interest. Mortgage loans are further divided into 5 categories:
  • Conventional
  • Flexible Mortgage Loan
  • Jumbo
  • Government ensured
  • Fixed-price
  1. Home equity loan: It’s a kind of another loan on your house which you can borrow if you need to take a second loan but the amount of this loan will depend on the value of your property and the mortgage loan you have already taken. For instance, the value of your property is $500,000 but you have already borrowed $350,000 as a mortgage then $150,000 is the amount that you can take as a home equity loan.

You have heard about these two terms: Home equity and Home equity line of credit. Don’t get confused among both. In the former one, you have to provide some upfront charges to get a loan(in other words, that would be your share to buy a new house) and for the rest amount, there would be monthly installments. And for the latter one, you don’t need to pay any advance fee and the whole payment would be in installments.

The repayment term for this loan is nearly 20 years with the APR of 3.49% to 11.95%.

  1. Car loan: It is also known as an Auto loan, for which your car would be the asset for collateral which you want to buy which can be new or used. So as the amount depends upon the value of your automobile. Various lenders who provide auto loans like LightStream,, and Carvana. The annual percentage rate for new cars is around 4.71% to 12.17% for 48-60 months of the repayment period.
  2. Loan for Business: Loan which is borrowed for the purpose of business to extend that. It can be taken to pay the salaries of employees until you get some revenue from your new company. These are also categorized by the following:
  • Term Loan: This loan is limited to $1 million.
  • Small Business Administration Loan: SBA loans give 10 years and 25 years of the period for the repayment.
  • Business lines of credit: The limit of amount varies to your credit limit (like a credit card).
  • Equipment loan: Its rate of interest totally depends upon the cost of equipment that you need to purchase and the success rate of your business.

If you are thinking to take a secured loan, then you must be aware of the mechanism of that:

When you have decided to borrow a secured loan then you must have an asset that you can put as a security of your debt. And this lien will be in the same place till the repayment of your whole debt amount. When the whole loan amount is repaid then the lien will be liberated but you failed to do so, then your collateral will be sold by the lender to get the cash.

Few terms which you must know about, before applying for a secured loan:

Rate: Awareness of an interest rate is a must, you should know that what actual rate you’ll pay for the amount you are applying. For secured loans, rates are low as compare to unsecured loans.

Repayment term: In how much time you’ll need to pay your whole debt, because if there would be less time then the interest will also be high and vice-versa.

Extra charges: Check if there are any other charges apart from interest. Maybe there is an application fee that you need to pay or some upfront.

Monthly installments: You should schedule your expenses so that your monthly payments get smoothly run. And do not opt for this loan if you can’t balance your installments and monthly expenses.

The need for Collateral: Which thing is acceptable to your lender? This you need to verify first. Because according to this your debt amount will be decided.


In the end, you must be prepared for keeping your valuables as collateral and opt to this loan only if you are confident enough that you can pay off your loan on time. So that you will not lose your property or whatever you’ll put as security of the loan.

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