Secured Loans

Secured loans are on of the most common lending contracts used today. A secured loan is one where the borrower has pledged an asset such as a car, property or house to the creditor who provides the loan. This reduces the risk to the creditor by providing the creditor with a sense of security that the borrower will pay back the loan. Normally the borrow will apply for a secured loan, rather than unsecured loan, for one of two reasons. One is to obtain (or increase the odds of obtaining) approval. The second is for a better interest rate then a unsecured loan would provide. However if the borrow defaults on the loan they risk losing their asset, therefore one should be careful using a home secured loan to finance a risky business because this could result in the loss of the home through foreclosure.

The best way to obtain the cheapest secured loan rate is to eliminate the risk for the creditor. This can be done in several ways, by providing an asset that is worth more than the loan amount and is easy to liquidate in the case of a default. Also having a good credit rating reduces the risk. Obviously these are not always easy to do and the value of an asset can vary from person to person and situation to situation. Here are a few other means to finding the cheapest secured loan rate.

If you own a home consider a home equity loan, these normally result in the best interest rates. Also shop around a little, rates vary from lender to lender, see our home equity rates section for a variety of options and rates.

One popular approach for a secured loan is called a savings secured loan, where you use a savings account with the creditor to secure the money you wish to borrow. The money in the savings account becomes the collateral for the loan.

One last piece of advice for finding the best secured loan is to consider nontraditional banking options such as Credit Unions and online only banks.

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