When it is difficult or impossible to get an unsecured loan, the alternative is offer collateral to a lender in order to get a secured loan.

A secured loan is one that the borrower has pledged property against, i.e. a car, a boat or some other item of value which the lender will put a "lien" on in case the borrower defaults on the loan. In this way, the lender can often offer better terms such as a lower interest rate, loan term and costs when offering secured loans.

Another type of secured loan is one in which a person buys furniture or appliances, etc at a retail store. The store may be willing to give the person credit so that he/she can purchase the item now instead of later. Usually, there is a fixed interest rate charged on the amount of credit and a fixed pay period. If the borrower defaults, the store's finance company can retrieve the item(s) bought on credit.

Secured loans are not mortgages. A mortgage involves “real property” (real estate) and are potentially more difficult obtain, especially in this economy. Mortgages involve large down-payments; in some cases whereas secured loans often don’t require any kind of exchange of funds up front. Also, if you repay a mortgage, you will often incur a repayment "penalty". This is because the lender will be losing out on interest that they had calculated would be payable when offering the mortgage terms originally. The laws governing secured loans have changed recently and if you decide to pay a secured loan off early you will only be charged one months interest.

Secured loans are generally much easier to acquire than unsecured loans, particularly if you have had credit issues in the past. Even your local bank may decline you for an unsecured loan. So the best way to get the money you need is to be willing to look at all of your valuable, unencumbered assets including your home, car(s), etc and ask what a lender would lend against these. Of course, you retain the assets, unless you fail to make your loan payments whereby the lender will then be entitled to your collateral. So it’s best to do your homework before you decide to put up any of your possessions against a secured loan.

However, for fast cash, you can't beat a secured loan. You can even get a secured loan through a pawn shop if you have gold or silver assets or other valuable items that they could possibly sell should you default on your loan. It is nice to know you have a source for emergency money as emergencies happen to all of us at one time or another. But be sure to look over any paperwork carefully and do your research.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED AGAINST IT. Securing short term debts against your home could increase the term over which they are paid and therefore increase the overall amount payable.

Secured loans are not regulated by the Financial Services Authority and are available on a referral basis through a preferred specialist supplier of Frog Financial Management and not First Complete Ltd. Frog Financial Management is not responsible for the advice given.