Yusra3
VIP Contributor
A secured loan requires collateral, an asset like a home or vehicle, to back the loan. If you default, the lender can seize the collateral. Common secured loans include mortgages, auto loans, and home equity loans/lines of credit using your property as collateral.
Secured loans typically offer lower interest rates since lenders face less risk with collateral. However, defaulting means potential asset loss. Unsecured loans like personal, student, and credit card debt don't require collateral but have higher rates.
To avoid default on a secured loan, make payments on time. Reach out to your lender if you foresee difficulties. They may offer mitigation options like loan modification, forbearance, or extended repayment plans.
Defaulting severely impacts your credit score for years. For mortgages, it leads to foreclosure where the lender can force a property sale to recoup losses. For auto loans, the vehicle can be repossessed. Prioritize secured debts with collateral at stake to prevent potential asset seizure.
Secured loans typically offer lower interest rates since lenders face less risk with collateral. However, defaulting means potential asset loss. Unsecured loans like personal, student, and credit card debt don't require collateral but have higher rates.
To avoid default on a secured loan, make payments on time. Reach out to your lender if you foresee difficulties. They may offer mitigation options like loan modification, forbearance, or extended repayment plans.
Defaulting severely impacts your credit score for years. For mortgages, it leads to foreclosure where the lender can force a property sale to recoup losses. For auto loans, the vehicle can be repossessed. Prioritize secured debts with collateral at stake to prevent potential asset seizure.
