A secured loan is one in which the borrower offers some security to the lender for the privilege of borrowing money. This security can be any kind of asset which the lender will become entitled to in the event that the borrower fails to make the necessary repayments on the loan. Secured loans clearly minimize the risk to the lender and as a result mean that they are usually offered at a more favourable rate of interest and with better terms than for an unsecured loan. Largely because the lender feels more confident of gaining a return on the investment made.



In secured loans, it is mandatory to keep the security against the loan with the lender. Secured loans are reportedly the most popular loans which people prefer to take out. Obviously the amount of money which each individual borrows is different and is dependent on his or her own needs.

There are a number of factors which influence the amount which is approved for a loan. These include the type of security pledged and its current and future market value. If the security is gold for example, lenders will need to approve a loan based on the predicted value of gold both now and at the end of the term. If a loan is secured with property, the amount of equity in the property will be taken into account and indeed whether this is likely to rise or fall over time. Lenders also consider the financial status of the borrower; employment details for example and whether or not they hold any share options. Last but by no means least, the borrower's ability to repay is a key criterion. Lenders consult credit reference agencies to obtain detailed credit ratings of prospective clients.

Customers with a poor credit rating are not exempt from applying for secured loans and in some cases this can improve their credit score as well as helping them out in a financial crisis. Usually, however, these customers will have to pay a much higher rate of interest.

Whilst lenders are more likely to give credit on a secured loan, the borrower must always be aware that if a payment is missed then the asset used as security will be at risk. If it is your home that is being used as collateral, you could become homeless if you default on loan repayments.

Being the most common loan, a secured loan can be used for any purpose. The repayment period will vary from person to person and depends on the amount being borrowed. In general this time period covers anything up to 25 years.

Secured loans are most suitable for people in need of large amounts of money who want a longer repayment period. Mortgages are the most common form of secured loans. Nearly all the lenders in the financial market, such as financial institutions, private financial companies, banks and building societies, now offer secured loans. These days, however, internet loans are increasingly popular. In the first instance, they offer convenience because they can be accessed directly from the home or office and secondly, they generally offer more competitive rates. The APR for online loan applications can be lower because the company overhead costs are also lower.

Finding the best secured loans on offer is not an easy task. Be prepared to spend a lot of time researching the high street and or the online markets to find exactly what you require.