Instead of securing your loan with an asset, such as a car or home, the loan is backed by your own money. The difference is that the collateral is your own money. Then, you make monthly payments toward the outstanding balance until the loan is paid off. You receive a specific amount of money upfront from the lender. Therefore, you benefit from lower interest rates and easier approvals.Ĭharacteristics of a Savings Secured Loan:Ī savings secured loan is similar to a personal loan. It can be more difficult to get approved, depending on your credit history.Ī savings secured loan is backed by something that has value.As a result, the interest rates are typically higher.

Lenders assume greater risk without any form of collateral.Credit cards and personal loans are common examples. In contrast, unsecured loans do not have any collateral.Because a secured loan is lower risk for lenders, it’s generally easier to get approved for this type of loan.If you cannot repay your loan, the lender can take ownership of the collateral (repossess your car or home) to recoup their losses.For example, car loans and home mortgages are secured loans. A loan is considered “secured” if it is backed by some form of collateral.It’s helpful to distinguish what “secured” means and how it can impact you financially before jumping into the key features of this loan. Savings secured loans aren’t common, but they’re one of the most affordable financing options available. But, have you ever heard of a savings secured loan? You’re not alone if you answered no. You’re probably familiar with the popular ones like car loans, home mortgages, and credit cards. When it comes to borrowing money, there are a variety of loan options.

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