Secured debt means that the loan is backed by some form of collateral. Possible forms of collateral include your car, home or tangible asset a creditor could liquidate to recover the borrowed amount. Secured loans allow borrows to earn lower interest rates because the risk of losing the value of the loan is diminished, compared to an unsecured loan.

Car title loans have become a popular way for consumers to refinance and get cash. The value of the car serves as the collateral backing the loan. If you fail to make payments, then the car can be repossessed. Car title loans are not always beneficial for borrowers because (a) cars depreciate and (b) the interest rate on the loan amount is rarely worth the risk.

Home equity loans are a frequently used type secured loan. Homeowners who have begun paying on the principal of their home have equity in that house. If homeowners want money to invest with or make purchases and don't want to sell their home, they can refinance their home for a certain amount. The cash obtained from the refinance is at the homeowners' disposal. However, the homeowners now have a second mortgage to pay.

Most homeowners that use the equity in their home to repay credit card debt do so because the interest on their mortgage is much lower than their credit card interest. There are two primary dangers, though, in this reasoning. One pitfall is adding unsecured debt to a secured debt. Failure to make payments can result in a foreclosure. The other is the homeowner, unless they change their behavior, will likely accumulate more debt. This scenario only exacerbates the problem of debt.

Secured loans, used correctly, can prove beneficial. Car title loans and home equity loans each come with their risks and rewards. A wise consumer will research the benefit to risk ratio and determine which is best. If debt is piling up and you are looking for debt relief, look through all the debt-relief methods available.