Types Of Loans
A secured loan is a loan in which the borrower places an asset up as collateral. Common examples of these include car loans where the car would be the collateral and home loans where the home is the collateral. If the borrower were to default on the loan, the lender would have the right to seize the collateral to recoup their investment.
With unsecured loans, there are no assets being used to secure the loan. Common examples of this type of loan would be credit cards or even payday loans. Interest rates will be higher with unsecured loans because of the greater risk to the lender. If a borrower were to default on one of these loans, the lender must sue the borrower to obtain a judgement.
These are short term loans with no fixed payback date. They cary an interest rate that will vary depending on the prime lending rate. These loans can be either secured or unsecured and they can be called for repayment by the lender at any time.
With subsidized loans, the loans interest rate is reduced by a subsidy. The most common example of this is a government subsidized student loan.