In the simplest terms secured means protected; from worst case scenarios by having a safety net in case of [enter scenario]. Insurance on your home protects you in case of flood, fire, burglary by covering all/partial damages. Insurance on your credit card protects you against identity theft, unemployment etc. by covering all/partial damages. A secured loan simply means there is a backup protection plan in case the borrower does not repay the loan amount.
The reasons behind it. If you were going to lend your neighbor a 20 bucks, would you feel comfortable enough to offer it knowing they may never return it to you? Some people would say $20 isn’t enough to interrupt their day, and their financial situation and even their friendship would remain the same. What about If you were going to lend your neighbor $1000, would you feel comfortable enough to offer it knowing they may never return it it to you? Most people would say that is a lot of money to risk, and If it was never returned they might not have enough money to cover a car payment, an upcoming vacation, their kid’s soccer registration etc.
Secured loan scenario: What if your neighbor told you to hold onto the keys to their moped in exchange for lending them the $1000 they needed for the week. Would you feel comfortable enough to offer them the money knowing that in the event they didn’t bring it back, you would have their moped of equal value? Most people would say they would feel better about lending that much money knowing that they had a safety net in case the worst case scenario. This is what secured loans offer. A secured loan provides protection for the person lending money in the event the loan is not replayed.
FunFact: The word “secured” can be used in place of collateral which also means to have a type of insurance, guarantee, etc.
What you cannot do with a secured loan: It is not within the rights of the lender to decide to keep the secured item in place of the original loan money. The security, whether in form of a car, a house, etc can only be taken IF the loan amount is not repaid by the date set out by both parties involved, and only through court rulings after all other avenues have been pursued.
What is an unsecured loan? An amount of money loaned out without security. This money is given out on its own without any security terms attached to it. Unsecured loans are often of lesser amounts, just as most people would feel comfortable lending $5 without a backup plan, most lending institutions will only give a small amount of money without protection. Even then, there are ways to retrieve the money which owed by taking it to court, garnishing wages etc.
The bigger the potential risk of loss, the bigger the security.
At Fast Access we offer unsecured personal loans up to $5000, unsecured close my deal loans up to $7500.00, secured car title loans up to $10,000.00 among other products. Visit our services to learn more about us. If you prefer to speak to someone personly call us anytime at 1.855.367.9191 or email firstname.lastname@example.org