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A secured personal loan is a loan that is backed by collateral. Collateral is your personal property. The two most common types of secured loans are mortgages and auto loans. If you fail to pay either your mortgage or auto loan according to the agreed terms, the lender has the legal right to repossess the property.
Secured loans are generally for higher amounts that unsecured loans, such as credit cards or personal loans, because the lender has more to lose if you default on the loan. Other types of secured loans include home equity loans and lines of credit, which are essentially second mortgages secured by your home; boat loans; and business loans in which you pledge your business's assets.
|Jennifer Mathes, Ph.D.|