Identification of the main types of loans

Loans can be made for a variety of reasons, and the funds can be used for a variety of purposes. For example, a person may make a loan to buy a car - this would be a car loan - or a person may make a loan to buy a house - this would be a mortgage. Both car loans and mortgages are what are called "guaranteed" loans. A secured loan is one of two types of loans, secured and unsecured.

A secured loan is one in which the debtor undertakes a tangible asset as collateral to the lender. In the case of an auto loan, the car is the tangible property. In the case of a mortgage, the house is the tangible property.

The law allows a creditor to repossess tangible property that is collateral to a secured loan. The bank can repossess the car, and the mortgage company can foreclose on a home. Secured loans can be sought for different purposes (to buy a house, car, boat, motorcycle, etc..) Sometimes the loans are intended to be used to fund such things as a family vacation can be assured. The holiday is not the promised good, but a borrower can use other assets as collateral for the loan and the loan proceeds, however, wants.

The other type of loan is an unsecured loan. Unsecured loans are loans for which no tangible has been promised. Credit cards, gas cards, store cards, medical bills, dental bills and hospital expenses are all kinds of unsecured loans.

The law does not permit recourse to the lender in case a borrower defaults on a loan without collateral. The lender can not repossess anything because there was nothing under warranty. The lender may, however, make life unbearable. You can call, knock on your door, and fill the boxes with the second, third, notices, and final....