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The lowdown on loans: secured or unsecured?

• There are two types of loans: secured loans and unsecured loans.

• Secured loans are loans that are secured by collateral. The lender will take a security interest in your property, whether it is your home, business or vehicle. Home equity loans and loans to buy a car, in which the car acts as collateral, are usually considered to be secured loans. In most cases, lenders will rarely give you more than 60 percent or 80 percent of the value of the collateral you can come up with.

• Unsecured loans, as the name implies, are loans that are not secured by any collateral. Personal loans, loans to get through college and even credit cards are examples of unsecured loans. In these cases the lender is lending you money based on your credit worthiness and reputation. Because the risk of non-repayment is generally greater than with secured loans, lenders generally keep the value of unsecured loans lower and apply higher rates of interest.

• More information about loans for different purposes is available below:

• • Home equity loans Releasing the equity built up in your home can free up substantial amounts of money for major projects such as home renovation. Home equity loans usually come in two types: closed and open. Read more	Personal loans Need to cover an unexpected expense at an inconvenient time? Lack the cash for an urgent home repair or medical bill? Short-term personal loans and cash advances are the most common solution. Read more
    Auto loans Buying a car, second to buying a home, is one of the biggest single purchases people make in their lives. Most opt to borrow to buy, although few work out the difference between the loans on offer. Read more	College loans There are several types of student loan available. Which one you use to pay you or your child’s way through college depends on several factors, from family income and credit score to eligibility for government subsidies. Read more