If you're not familiar with the term, a secured loan is a loan which requires a security deposit of some kind (also known as collateral) to protect the lender against nonpayment. The secured loan is the preferred type of loan for lenders who deal with people with bad credit, but is also used when purchasing certain types of property (such as an automobile or real estate.) Interest rates tend to be lower with a secured loan than with an unsecured loan (which doesn't require collateral, but charges higher interest rates to cover the additional risk.)

Types of collateral

Just about any property with value can be used as collateral for a secured loan, though some types are more common than others. Jewelry and rare coin collections can be used as collateral for some loans, though they are usually held by the lender to help protect them from theft or loss. Automobiles and real estate are popular forms of collateral, and lenders usually allow you to keep them while you repay the loan