Information for Secured Loans

In a world that’s ruled by money, it pays to know your way around the loan underwriting process. Secured loans account for a large portion of the borrowed cash on this planet, meaning a lack of knowledge about how it all works can be financially devastating. Understanding what a secured loan is can help you finally qualify for the funds you need to achieve your goals.

What Is a Secured Loan?

Unlike unsecured loans which generally require little more than basic identification and a signature, secured loans require some sort of collateral. The borrower must put up a piece of equitable property with an equal or greater value than the amount of money borrowed. If the security is satisfied, the borrower is then given cash or a line of credit in the form of a bank loan or secured credit card. Most of the time, secured loans are used by individuals and/or businesses that don’t have good enough credit to borrow money on the merit of their word (good credit rating).

Who Qualifies for a Secured Loan?

Consumers who meet the basic requirements of a loan underwriter will qualify for a secured loan. Terms and conditions always apply and will vary between lenders and borrowers. Generally, however, secured loans come with higher interest rates than unsecured loans. Many require either a down payment or a signed contract stating voluntary relinquishment of collateral property if the loan is not paid back in full. Therefore, qualifying consumers must also have the means to present a substantial down payment or give valuable collateral while having a favorable credit score in the eyes of the lender.

Using a Secured Loan Wisely

Secured loans are not just given out by eager creditors who have nothing better to do with their money. In fact, consider yourself lucky if you’ve recently qualified for one, as banks upped the ante on borrowers after the 2008 economic crisis making qualification criteria much stricter. Using your money wisely is the best way to reverse the trend while preventing your credit score from taking a nose dive.

Diligent financial practices, especially where borrowed money is concerned, can be very tricky. As always, pay your bill on time every time and communicate with the lender if something comes up that prevents you from submitting repayment funds punctually. Understand how interest and principle work so you can try to pay more than the minimum amount and get the loan paid off faster.