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Secure credit is credit that is given with a connection to a piece of collateral, such as a car or a home. This means that, if you were to default on your payments, the lender would be legally entitled to taking possession of the collateral. An example of this is a car loan, which is a loan that is used to purchase a car. On the other hand, an unsecured loan is one that is not protected by any collateral. This means that the lender cannot immediately take your property of you default on the loan. An example of this is a credit card.
In the case of a secured car loan, interests tend to be lower because of the security that the collateral (the car) provides. Moreover, these loans tend to provide interest rates that are fixed, which means that it is easier to plan for this expense and avoid falling behind on payments. The risk for the lender is less with a secured loan, as he is able to take the property and resell it if the borrower is unable to repay the loan. On the other hand, credit card are riskier for the lender (the bank) as they are unsecured, and this means that they are unable to immediately take any property from the borrower who did not repay. Because of this high risk, interest rates also tend to be high.
Secured credit refers to credit that is secured by a piece of security, such as a car or a house. This implies that if you mistake on your repayments, the lender has the legal right to take control of your property.
A vehicle loan, which is a loan used to buy an automobile, is an instance of this. An unsecured debt, on either hand, is something that is not secured by anything.
Because the security offers security, interest rates on secured car loans are often cheaper. Furthermore, these loans usually have set interest rates, making it easy to budget for this outlay and prevent getting behind on repayments.
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