How Beneficial Is It to Get A Secured Loan?

A secured loan is a type of loan that requires a collateral in the form of security for sanctioning the loan. Banks ask for a collateral to get assurance of retrieving the loan amount that they sanction to the borrower. A secured loan offers a lot of benefits to its users.

What are secured loans?

Due to the increasing property price, buying a house is not within the capacity of a normal salaried person. Due to this reason, a large number of people apply for a home loan. Secured loans are one of the types of home loans that are sanctioned by the financial institutions.

Due to missing loan payment, the lender or bank can collect the collateral. Due to lower risks and assurance involved in this type of loan, it is sanctioned at a lower rate of interest. Whenever the person defaults in making loan payment, then the bank has all the right to collect the collateral.

Different secured loan types

Mortgages are secured as your house acts as “collateral” for the loan. If you miss any payments, then the loan sanctioning agency will foreclose your home loan and recover the amount of your collateral. Some of the different types of loans that are offered by secured loans are:

  • Car loans are secured loans. In this type, the car itself acts as a collateral for the loan. On failing to make payments, your car can be repossessed.
  • The other type of secured loans is secured credit cards. Your loan sanctioning agency bank will ask you to deposit the amount in your account against the permissible limit of the card. This is beneficial for people who want to improve and build their credit history.
  • Title loan is another type of secured loan. Here a paid-off vehicle is used as a collateral to grant another type of loan. Mostly, these loans have the high rate of interest.

Advantages of a secured loan

  • Secured loans are helpful for people who are unable to get unsecured loans.
  • These loans are a great way for people to build their credit history and credit score.
  • As less risks are involved with this type of loan, a borrower can get it at a low interest

Things to note when you are opting for a secured loan

If you are planning to apply for a secured loan, then the first thing you need to consider is to choose the right thing to be used as a collateral. Also, ensure that you are making full and timely payments so that you don’t lose your asset.

So, carefully consider your loan paying ability and budget to pay the loan prior to borrowing any money. By paying your loan installments on time, you will definitely see a positive difference in your credit score.


These are the advantages of a secured loan. This loan is a great method to build credit state if you choose to seek the assistance of a reputable lender such as a credit union or a bank.


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