In the area of consumer finance, Secured Loans take a backseat to the more common Personal Lending products which are sanctioned on a credit-scoring system.
The kind of people who would be most interested in Secured Loans are those who may score badly on a credit-scoring system, for instance those who are paid in cash or are brand new to a certain area with no financial history. Businesses are another common customer of Secured Loans, as they generally have assets they can use to obtain finance in this manner. This type of lending is normally associated with larger sums of money being borrowed than with regular Consumer Finance. Perhaps the most common form is when a customer purchases a car and uses the garage's own finance package, with the car held as a form of insurance in case of payment defaults. Second mortgages are another major form of finance structured in this way.
It is vital that customers only use reputable companies when undertaking a financial transaction in this area. Most of, what are termed, Predatory Lenders operate in this particular field of Finance. Certain companies have been known to arrange an agreement specifically in order to foreclose on the borrower when they default on their payments, thus taking a house or a car used as a guarantee and selling it on for a vast profit. Companies of this ilk normally charge exorbitant interest rates in these circumstances. The simplest form of this type of lending is when a reputable person stands as a guarantor for the person who has borrowed the funds. This will nearly always be an existing customer of the lending provider upon whom they can rely in the event of defaulted payments.
