Secured loans are a type of installment loan. After the lender approves you, you’ll get your money as a lump sum. Then, you’ll pay back what you borrowed in equal monthly payments, plus interest.
With a secured loan, you need to make sure that both you and your collateral meet the lender’s requirements. If your application is approved, the lender will place a lien on your collateral. In the meantime, you’ll keep the collateral and can continue using it.
What happens next depends on you.
- If you finish paying your loan with on-time payments, the lender will remove the lien from your collateral. You are no longer at risk for repossession.
- If you stop making payments, the lender can repossess your collateral. You might be able to get collateral back by getting caught up on your loan, but only if the lender doesn’t sell it first.
Considering using your car as collateral? Make sure you have the right
car insurance. The lender will almost certainly require you to have full coverage (comprehensive and collision).
Also, you usually have to own your car outright to use it for a secured loan. If you’re still making payments, consider an auto equity loan instead.