Secured Credit

Secured credit refers to loans or credit agreements that are backed by collateral, which is an asset of value. If the borrower fails to repay, the lender can take possession of the collateral to recover losses. Common examples include mortgages (where the home secures the loan) and auto loans (where the vehicle is the collateral). Because secured credit reduces the lender's risk, it often comes with lower interest rates compared to unsecured credit, which has no collateral backing. This can make secured credit a more affordable option for borrowers looking to finance large purchases.