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A secured loan is a loan "backed" by collateral -- such as a vehicle or house -- that the lender can take if you don't pay the loan. Secured loans can be easier to qualify for and generally have lower interest rates. Here, we'll discuss what a secured loan is, when it's a good idea to take one out, and the risks associated with this type of loan.

Definition of a secured loan

A secured loan is a loan that you get by putting up collateral, like a car or a home. If you miss payments, the lender can sell your collateral to pay back the loan. It can be easier to get a secured loan than other types of loans.

Reasons to get a secured loan

• Your credit score is low
• You're looking for a low-interest loan

If you don't like the idea of getting a secured loan, you're not alone. Low-credit borrowers can look at personal loans for bad credit to find a loan with no collateral and easier qualifying requirements.

What is an unsecured loan?

The opposite of a secured loan is an unsecured loan. An unsecured loan doesn't involve collateral.