Personal loans come in two main types. One of these is the secured personal loan. Secured personal loans are those that require collateral. And because there is collateral involved, this type of loan is easier to apply for. 

In a secured loan, the lender places a lien on your asset. It means that when you cannot pay the loan, the lender can take your asset and sell it. The collateral gives security to the lender that they can recoup their loss if the borrower fails to pay.

There are different types of secured loans available. These are:

1. Mortgage. You put your house as collateral when buying it with this type of loan. If you cannot pay for the loan, your home will be foreclosed. There are two types of mortgages — fixed-rate and adjustable rates. The interest rate stays the same in a fixed-rate mortgage. On the other hand, the interest rate would depend on the prevailing rate at the time in an adjustable-rate mortgage. 
2. Home equity line of credit. This type of loan also puts your home on the line as collateral. You can enjoy the perks of a credit line just like a credit card with this. It can also be claimed as a lump sum. This type of loan is typically used for home improvement, debt payment, and large purchases. 
3. Auto loan. You can take an auto loan if you cannot purchase a car in cash. With this type of loan, you put your vehicle as collateral. Failure to pay in the agreed time will give the lender the right to seize your car. 
4. Loan for land. This type of loan is excellent for you if you want to purchase land but is short on cash. The land you will buy will also serve as collateral for the loan. 
5. Business loan. There are different types of collateral that you can use when applying for a business loan. These are land, building, vehicles, equipment, and inventory. A business loan is usually used for business expansion, new equipment purchases, and wage payments. 

Collaterals for secured loans

Most lenders prefer efficiently collectible assets that they can quickly sell as collateral. Examples of these are:

1. Real estate
2. Cash accounts
3. Vehicles 
4. Machinery
5. Equipment
6. Investments 
7. Insurance policies
8. Collectibles
9. Pieces of jewellry 

How to apply?

Take these steps first before applying for a secured loan:

1. Check your credit score. Before applying for a loan, you should check your credit report first. Secured personal loans do not have stringent requirements compared to unsecured loans. However, it is still best to check your credit report as your creditworthiness also plays a role in getting approval for your loan.
2. Check your asset’s value. Your loanable amount will depend on the value of your asset, so you should get it appraised before applying for a loan. 
3. Check other lenders. Do not settle on the first lender that you see. It is best if you check out other lenders first. Different lenders offer different interest rates and payment schemes.
4. Apply for a loan. After checking, you can finally apply for a loan after finding the most competitive lender. 
5. A secured personal loan is riskier than an unsecured loan. You can lose your property if you fail to pay for your loan. However, it has lower interest rates. It would be best to study your options before applying for a loan. 

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