Loan Roundup: Types Of Loans You Can Secure

by | Jul 25, 2022

Investors who have big ideas tend to have one primary concern at the onset of a particular project: Money. How much will you need, and how will you get it?

Your business plan certainly helps, but you improve your chances if you can offer prospective lenders some type of collateral to secure the loan. One of the most common secured loans is a conventional mortgage, where the money you borrow is secured against the property you purchase.

Types Of Loans

But what are the other types of loans you can secure? The team at Quick Lending of Texas has put together this guide to help you consider how you might best position your assets to fulfill your big dreams. Here are some of the most common secured loans and how they work:

Conventional Mortgages

You and your family need a house to live in. Banks and other federally approved lenders provide the capital so you can close on the purchase of your dream home. A conventional loan is based on your creditworthiness and financial ability to pay. But if things go bad — say, you lose your job — and you have to stop paying on the mortgage, the lender can foreclose on the loan, take the house from you, and resell it to gain back their investment. Conventional mortgages have a typical payback term of 30 years.

Auto Loans

In our mobile society, cars are a necessity — to get to work, to get to school, to visit relatives. Lenders work with buyers directly or indirectly through auto dealers to provide the money upfront to complete the purchase. You secure the loan with the car itself; if you can no longer pay, the lender can repossess your car and resell it to earn back as much as it possibly can.

Land Loans

Land loans are similar to mortgages as they provide the capital the investors need to buy parcels they have identified as important to their investment strategies. The parcels may be used to build commercial buildings, homes, apartments — or maybe even nothing at all, as long as the investor can pay back the loan in full. If the borrower comes up short, the lender can claim a security interest in the land. Note that these types of loans are uncommon because they do not involve projects that are immediately revenue-generating.

CD/401K Loans

Somewhat paradoxically, your own history of investing can become a source for a loan you can secure. Many organizations allow employees to make hardship withdrawals from their 401(k) accounts. In such a case, the borrower pays the retirement account back. If something were to happen and the borrower became unable to pay that amount, the money would be drawn down from the 401(k).

Home Equity Line of Credit

Many homeowners reach a point where they would like to make home improvements. That also takes money. Home equity lines of credit allow you to borrow against the equity in your house — the portion of your house that you already own from diligently making payments through the years and through increased market value. Here again, the amount you put into the line of credit is secured by the value of your home. Lenders would collect in the sale of the home.

Tradeoffs Involved in Secured Personal Loans

We have mentioned it a few times, but it bears repeating. When you secure a loan with an asset of some type, whether it be your house, a car, a life insurance policy, or a 401(k) balance, you run the risk of losing that asset. This can happen when you are unable to pay back your secured loan, leaving the lender with no choice but to foreclose or claim the asset in some other form.

Each state has a different set of rules when it comes to seizing property or other collateral to pay off debts. Pay close attention to your loan contract, which should outline the process and advise you of the rights you have. These terms may establish how and when the lender can reclaim assets as reimbursement.

Seizing property is not a lender’s ideal outcome, because they have to sell the asset to be made whole. Banks are not Realtors, so they would rather continue to receive loan payments.

Call on Quick Lending, which serves Houston, Pasadena, and other parts of central Texas, for all your secured loan needs. We’re a private, client-focused lender that’s ready to help you with your business expansion, real estate investments such as fix-and-flip and ground-up construction, and other types of projects that require fast access to cash.

Our experienced team is proud of our ability to make fast decisions and close on loans quickly. We also have a network of preferred vendors who can provide advice and support for our borrowers. Call us or contact us online today to discuss your options.