By Jakob Jelling
www.cashbazar.com

A secured loan refers to those loans that are backed by collateral. The collateral is a tangible property such as real estate, car, boat, etc, that serves as a guarantee that the loan will be repaid.

A secured loan is riskier than an unsecured loan. This is due to the lack of property required as a backup for an unsecured loan. You are risking your collateral in the event where you are unable to repay the secured loan. However the extra safety for the lender means the borrower can get reduced interest rates on the loan.

Secured loans can include home loans, auto loans, etc. One type of secured loan you can get is a home equity loan. This type of loan has very low interest rates. This loan option can be a great way of paying off your high interest unsecured loans.

In fact a secured loan can help you in your debt elimination and debt consolidation endeavors. Debt consolidation is a process of reducing your monthly payments and total amount of debt. Many debt management agencies will tell you to take out one low interest loan to pay off all your other loans. This way you can reduce your debt burden.

However there is often a trade-off between risk and the amount of interest rate you can get. For example if you take out a home equity loan, you may be risking your house by putting it up as collateral. However the low rate secured loan can be used to pay off high interest unsecured loans so you end up paying substantially less in interest payments over a period of time.

In addition to lower interest payments, a secured loan also has the benefit of less paperwork for the application, as it is easier to convince lender to lend to you. They have the guarantee with your property acting as collateral. Also you may be able to borrow a larger sum of money than you would relying on just your credit history. Easier repayment terms and a longer time for loan repayment are additional benefits.

As with other loans, you should compare loan options and loan rates to find the best deals on a secured loan.

About the author Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.