 TITLE: Secured vs. Unsecured Loans: What You Need to Know CONTENT: What Is a Secured Loan?\n-----------------------\nTo understand how a secured loan works, think of a typical auto loan. In exchange for the money you need to purchase a car, the lender uses collateral—in this case your new car—as a form of security. If you fail to make your loan payments, the lender can repossess your car, sell it and use the proceeds to help pay off your debt.\nMortgages and home equity loans use your home as collateral. Secured credit cards and personal loans require a cash deposit. Title loans let you use collateral—often the equity in your car—to borrow money. What all of these loans have in common is the lender's ability to take possession of valuable property you've pledged if you don't pay your loan as agreed.\nThe upside for you, the borrower, is access to credit. Without collateral, you might not be able to borrow hundreds of thousands of dollars to buy a home. Because secured loans are considered less risky, interest rates are often lower than they would be without collateral. In the case of secured credit cards and loans, making a cash deposit upfront might allow you the opportunity to build credit when unsecured credit is not an option. END