Secured Personal Loans

Taking out a personal loan can be a great way to balance out your financial needs in certain circumstances. It can provide instant money for you to balance your finances and can provide you with the ability to consolidate higher interest rate debt you have, such as credit card debt. One of the requirements of taking out a personal loan is a form of security, in one form or another. This article will provide you with an explanation of what this security involves and what you should consider when taking out a secured personal loan.

What is a Secured Personal Loan?

A secured personal loan is a loan to an individual that is secured by some promise or asset. A lender will often want some assurance that their loan will be repaid and security on the loan will be provided to reduce the risk that the lender has. The form of security will fluctuate widely. Sometimes a significant asset, such as a home, car, or financial assets will be used as security on the loan. Often, in cases of significant borrowings, the lender will place a lien on this property which will establish their rights to these assets above the claims of any other subsequent creditors. Other times, the security on the personal loan will be a guarantee by a family member or friend of the borrower and the lender, upon default of the borrower, will be able to try to recover the outstanding loan balance from the guarantor.

Benefits of Secured Personal Loans

Secured personal loans give lenders additional comfort that their loans will be repaid and often provide borrowers with larger loans than they would otherwise qualify for, at more favorable terms. This provides greater access to credit to borrowers and helps them to better finance their personal needs.