Examples of secured loans

examples of secured loans

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I am writing an essay on unsecured loans and am now trying to find some examples, so that I may then talk about the pros and cons for each example. I have already mentioned credit cards and an unsecured personal loans from a bank, and have described the pros and cons for both examples.

I wanted to also add tuition fee loans into the essay too, but the essay is limited to unsecured lending to retail consumers.

I want to add in unsecured loans in Auto financing too, but most pages I look into the topic discuss auto financing as simply a personal loan which is used primarily for purchasing vehicles.

I was hoping someone could give me an example or two of unsecured lending, and if it's not too much, could provide a resource which covers the example in more detail.

Secured vs. Unsecured Loan: What Are the Differences?

Examples of secured loans

Secured vs. Unsecured Loan: What Are the Differences?

By Lizzy Martini

If you’re considering taking out a loan, you might be trying to choose between a secured vs. unsecured loan. What is the difference between secured and unsecured loans, and which type is a better fit for your financial goals?

Here’s what you need to know about secured vs. unsecured loans—broken down in to three easy categories.

The most fundamental difference between secured vs. unsecured loans is collateral—in other words, whether an asset backs the loan.

A secured loan is backed by an asset. If you stop making payments on the loan, the lender can seize the asset—known as repossession or foreclosure—and try to sell it to recoup their money. Mortgages, auto loans and pawn loans are common examples of secured loans.

An unsecured loan is not backed by an asset, which means there is no collateral—like a house or car—for the lender to seize if the borrower stops making payments. Most credit cards and personal installment loans are unsecured loans.

Interest rates for secured loans tend to be lower than for unsecured loans because secured loans are generally less risky for the lender.

If you stop making payments on a secured loan, the lender can try to sell the collateral to recover their money. If you stop making payments on an unsecured loan, the lender can still try to recoup their money—but it won’t be as simple as seizing and selling the collateral. To compensate for the additional risk, lenders generally require higher interest rates on unsecured loans.

Collateral, however, is not the only thing that influences your interest rate. Lenders also assess your credit profile—regardless of whether the loan is secured or unsecured. As part of this process, lenders may consider your credit report, credit score, income and/or employment status.

For a secured loan, the value of your collateral plays a primary role in determining the size of the loan. Typically, lenders allow you to borrow less than 100% of the assessed value of the asset. For example, if you’re buying a car worth $10,000, the dealer might be willing to lend you $8,000 to buy the car. In this scenario, the “loan to value ratio” (LTV) is 80%.

For an unsecured loan, the loan amount is largely determined by your credit profile. The lender assesses how much debt they think you can responsibly manage and pay back on time. For certain types of unsecured loans, the amount can also be subject to state laws. In California, for example, the maximum amount you can get from a payday lender is $300.

Secured vs. unsecured loan: Key differences

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