When you’re borrowing money, you’ll likely need to make a decision about a secured loan vs. unsecured loan. What’s the difference? Here’s an explanation about choosing a secured LOC vs. unsecured LOC.
A secured LINE-OF-CREDIT is connected to a piece of collateral – something valuable like a car or a home. With a secured LINE-OF-CREDIT, if you don’t repay the loan as you have agreed that collateral can be automatically taken or repossessed. A HOME EQUITY-LINE OF CREDIT or HELOC is the most common type of secured LOC. The money is borrowed against the equity in the home.
An unsecured LINE OF CREDIT** is not protected by any collateral. If you default on the loan, the lender can’t automatically take your property. The most common types of unsecured loan are credit cards, and personal LINES-OF-CREDIT.
Both secured and unsecured lines of credit have advantages over other types of loans. They can be used (or not used) flexibly and repeatedly, with low minimum payments and no demands to pay in full as long as the payments are up to date.
The secured line of credit is clearly the better option if at all possible, as it keeps YOUR costs of borrowing to a minimum.
Citizens Trust Bank offers both to help make your dreams reality