What is a secured vs. unsecured loan?
A secured loan means you have given the lender something of value to hold as collateral until you pay your loan in full. This can be many things: car titles, boat titles, savings, home titles, stock, etc. You generally receive better rates of interest than unsecured loans. As an example, car loans are what most everyone is familiar with. The lender keeps the physical paper car title. The lender is listed as the lien holder on the form and through the DMV records until the loan is paid off. The lender then will sign off the car title and release it to the borrower. If the loan is not paid as agreed and is in default, the lender can take the collateral, sell it and apply the dollars from the sale to the balance of the loan. An unsecured loan has no collateral. Interest rates on these loans are generally higher than loans with collateral due to the higher risk involved for the Credit Union.
