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Secured loan

Secured loan

What is a Secured Loan?

A secured loan is a type of loan that requires borrowers to put up collateral. Lenders are more "secured" because, even if the borrower stops paying monthly payments, the lender can take the underlying collateral to recoup their losses.

Interest rates are a good proxy for risk. Since lenders are taking less risk and can mitigate with the underlying collateral, they'll offer lower interest rates on a secured loan. Additionally, it may also be easier to qualify for a secured loan since the lender's downside is mitigated.

Some common secured loans include mortgages, HELOCs, and auto loans. Real estate equity, cash, equipment, insurance (eg. PMI), and equipments can be used to secure loans.

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