A secured loan is backed by an asset — collateral — that the lender can seize and sell if you stop paying. Because that collateral reduces the lender's risk, secured loans almost always carry lower rates than unsecured loans for the same borrower.
Common secured products
Mortgages (house), auto loans (the vehicle), HELOCs (home equity), secured credit cards (cash deposit), share-secured loans (savings account), and pawn loans (physical item). Some personal-loan lenders also offer secured personal loans against a savings account or CD.
What happens if you default
The lender starts a repossession (auto), foreclosure (mortgage), or simply seizes the deposit (secured card / share-secured). Loss of the collateral does not always wipe out the debt — if the asset sells for less than what you owe, the deficiency balance can still be collected.
When to choose secured over unsecured
If your credit is too thin or too weak for an unsecured offer, or if the rate gap is large enough to justify pledging an asset you wouldn't otherwise risk. Secured personal loans are a credit-building tool worth considering for borrowers below 620.
Frequently asked questions
Can I lose my house with a secured personal loan?
Only if the loan is secured against your house (a HELOC or home-equity loan). A secured personal loan against a savings account puts the deposit — not your home — at risk.