An equipment loan, for instance, is a type of secured business loan. Say you own a construction business and need to purchase a new dump truck. You could use an equipment loan, secured by the dump truck you plan to purchase, to pay for it. As long as you pay the loan on time, you wouldn’t be at risk of losing the equipment you purchased.?
One thing to note about secured business loans is that you may also be required to sign a personal guarantee. This means that you agree to be personally liable for any debts taken out by your business if the business defaults on the loan. So if your business runs into cash flow issues, for example, you could be personally sued for a defaulted loan.?
Car Title Loans and Pawnshop Loans
Other types of secured loans include car title loans and pawnshop loans. Car title loans allow you to borrow money using your car title as collateral.? Pawnshop loans can use anything from tools to jewelry to video game consoles as collateral, depending on what you’re willing to pawn. These are generally short-term loans that allow you to borrow small amounts of money.?
Car title loans and pawnshop loans can carry interest rates that are well above average compared with other types of secured loans, and if you fail to repay them, you could lose your car or your personal assets proceed the link now held in pawn.
Life Insurance Loans
A life insurance loan lets you borrow money against a life insurance policy using its cash value as collateral.