A secured loan is a loan that requires some sort of collateral to obtain the loan. Generally speaking a secured loan has a low interest rate. This is because it is not as risky as an unsecured loan. And unlike an unsecured loan, if you should default on your secured loan, the bank can take the collateral that you put up to secure the loan.

The most common types of secured loans are car loans and mortgage loans. Many people get secured loans in a effort to rebuild their credit. This is a great idea. However, you should never take your unsecured debt and transfer it to a secured loan. Many people will take out title loans or a second mortgage to pay off their credit bills.

The problem is that once you do this, you put your home or car at risk. If you should default on your payments, they will come after your home or your car. So you could basically end up homeless. That's why it is never a good idea to use a secured loan to pay off unsecured debt.

As stated before, secured loans are a great way for an individual to build or rebuild their credit. If you are denied an unsecured loan, you will more then likely be offered the option to take out a secured loan. With a secured loan your interest rate will be much lower then that of an unsecured loan.

This is because secured loans present very little risk to the bank. If you should default they will be able to recoup some of their money by selling your house or car.

When it comes to getting a secured loan be very careful with what you choose to use as collateral. The most common things are of course homes and cars. However, each bank is different and might not require that you use your home or car. Some banks will use a savings account as collateral.

Just know that you won't be able to use that money until you pay off the loan. The bank will hold on to it for the duration of the loan. Once you have met your obligations, the bank will release the money back to you. The great thing is that you will still be drawing interest on the money that you have in your savings account. So even though it is not available to you, you are still making money off of it.