Different types of secured Loans

People take out loans for all sorts of reasons and lenders offer a variety of loans to meet individual borrowers’ needs. With more a more people taking out loans, it’s become big business for lenders.

Generally loans come in two categories – secured loans and unsecured loans. Secured loans are secured against the mortgaged property and the lenders risk is therefore greatly reduced. Hence borrowers defaulting in repayment of secured loans the lender has the legal right to repossess the property and recoupe his money.

Secured loans can be taken out for all sorts of reasons. One of the many purposes of taking out secured loans is to consolidate all debts into one easy affordable loan. Many consolidation secured loans replace unpaid credit bills and unsecured loans which can attract very high interest rates. 

Mortgages also come into the category of secured loans. Because buying a house is such a heavy financial commitment, lenders would be unwilling to lend money without securing the loan against the property. Thus mortgages would be classed as first charge secured loans and any subsequent secured loans would be a second charge on the property. Therefore in the case of borrowers defaulting with repayments resulting in repossession of the property, the mortgage lender’s claim would take precedent over any subsequent secured loans that are against the property. 

Homeowner loan is the most popular type of secured loans and as the name implies, only home owners can apply. Interest rates on homeowner secured loans are generally comparably low and can be used for any purpose. Homeowner secured loans for cars can also be considered as the lender may take away the borrower’s car if he defaults on the repayment. Homeowner secured loans can also be used for home improvements, holidays, weddings and many more reasons.

Secured loans can also be taken out to finance businesses. Secured loans for businesses can be secured against the residential property as well as the commercial property. Business secured loans can be used to purchase land, purchase raw material, pay wages, new machinery, buildings an for many other purposes.

Bad credit secured loans are also available if you have a poor credit score. Lenders are generally opposed to giving bad credit loans without security and will therefore only consider secured loans when borrowers have a bad credit history.