A secured loan is a type of loan where the borrower offers an asset as collateral to the lender. In case the borrower fails to repay the loan, the lender can take control of the asset.
This is different from a credit card loan, which is considered an unsecured type of loan. While unsecured loans carry only a promise from borrowers that they will repay the loan, a secured loan is one that is secured by borrowers’ assets, which are usually their houses or cars.
Secured loans have many advantages over unsecured loans. You can borrow a larger amount of money with a secured type of loan. You can have a longer repayment schedule for this type of loan that could stretch to as long as 30 years if you so desire.
There are many reasons why you would opt to apply for a secured loan. One of these reasons, of course, is the fact that you can borrow more money than you can with an unsecured loan. So, if you need money to renovate your home or to buy a piece of furniture, you could easily manage it with a secured loan.
Another reason is that your application for a secured loan may be approved despite your bad credit history. Since you have an asset to make sure that you will repay the loan, the lending company, usually a bank, is more inclined to grant you that type of loan than an unsecured one.
To qualify for a secured loan, you have to have your own home, as well as secondary assets like a fully paid car. These assets will secure the loan. So, if you need a large loan to improve your home, consider applying for a secured loan.
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