Secured loans, such as title loans or mortgages, use collateral as a basis for providing loan funds. These loans usually come with lower interest rates, as a form of collateral is used in case of default. While these loans lower the lending risk for the financial institutions, they increase the risk associated with borrowing funds. If you don’t pay the loan on time, or fall behind, you may lose your asset or property. Here is a list of these types of loans:

1. Home Mortgages

Home mortgages are type of loan that is secured by the property that is being purchased. If the borrower defaults, a lender can take the house plus attach all the assets of the borrower. Because this secured loan involves a major purchase—your house—the terms are usually set for a longer period. The interest rate is lower because the collateral for the loan is real estate.

The most common mortgages are adjustable rate and fixed rate mortgages. As the name suggests, an adjustable rate mortgage features a fluctuating interest rate. An adjustable rate mortgage begins with a low rate of interest, which rises after a certain period—normally three to five years.

A fixed-rate mortgage features a fixed interest rate—one that remains the same over the life of the loan. The fixed-rate mortgage is a five-year mortgage that is amortized over a 25-year period. At the end of five years, the borrower must refinance the loan.

This exposes the borrower to any rate increase that happens over the interim. If the borrower tries to prepay the loan during a decline in rates, he or she will have to pay a large amount in prepayment penalties.

2. Auto Loans

An auto loan is a type of secured loan where a vehicle is used as a form of collateral. The lender pays the vehicle’s full price to the dealership while the borrower pays monthly installments to pay off the loan. In turn, the lender charges interest on the amount borrowed.

A lender checks the borrower’s credit history before this loan is approved. The main reason for checking the credit rating is to determine the interest charged. If you have poor credit, you will usually still qualify for an auto loan. You just need to pay more interest.

3. Title Loan Funding

Title loans are short-term sources of financing that use a paid-off car, truck, SUV, or motorcycle as collateral. The vehicle should be in good condition and drivable. You should also have full-coverage insurance on the vehicle.

To determine how much money to loan, the lender will assess the vehicle’s appearance and refer to pricing guides. Usually, the amounts of title loans are around half the value of the vehicle. You should have a steady form of income to show you can pay off the loan amount. Unlike other types of secured loans, title loans frequently have high interest rates.

4. Pawnbroker Loans

A pawnbroker provides short-term loans by placing a temporary lien on an item the borrower uses for collateral. The most common items used for this purpose include tools, jewellery, electronics, and musical instruments. The loan amount depends on the worth of the collateral. Collateral value is determined by the condition of the item and its demand.