Secured loans require collateral. Here are some types of secured loans.
Auto loans
Auto loans are a type of debt that may involve collateral. In this type of loan, the vehicle generally serves as the collateral. If the borrower fails to repay the loan, the lender may be able to repossess the vehicle to recoup some of the money for the loan.
Mortgages
Mortgages generally require collateral. In this type of loan, the home or property itself is used as collateral. Should the borrower default on the mortgage, the lender may be able to foreclose on the home or property.
Home equity lines of credit
Home equity lines of credit (HELOCs) typically use a borrower’s home as collateral. The money from a HELOC is often used to pay for things like home renovations and improvements.
Like credit cards, HELOCs are an example of revolving credit. With a HELOC, a borrower can draw from a revolving line of credit, repay it and then draw from it again when they need more funds.
Home equity loans
Home equity loans are similar to HELOCs in that they both typically use a borrower’s home as collateral. Here’s one major difference: With a HELOC, a borrower is issued a revolving line of credit to draw from—but with a home equity loan, they’re provided with a lump sum to pay back over a fixed term.
Secured credit cards
If you have new credit or poor credit, secured credit cards might be easier to qualify for than unsecured cards. And with responsible use, a secured card can help you build or rebuild your credit history. With these types of loans, a cash deposit is used as collateral to open the account.
Business loans
Business loans, which can be used for things like buying equipment or funding company projects, are another type of loan that may require collateral. In this case, collateral may include assets like inventory or land.
