Welcome to the Money Rep

There are two different types of loans: secured loans and unsecured loans. Understanding the differences between the two is an important step in achieving financial literacy and can have a long-term effect on your financial health. 

The basic difference between the two is that secured loans offer collateral and unsecured loans do not. This affects your interest rate, borrowing limit, and repayment terms. 

At IAACU, we offer both types of loan, but there are pros and cons to each, and we have highlighted the differences for you here: 

Secured  

Secured loans are protected by an asset, such as a home or a car. The lender will hold the deed or title until the loan is paid in full. Other items that can also be used would include stocks, bonds, or personal property. 

Secured loans are the most common way to borrow large amounts of money. A lender is only going to loan a large sum with a promise that it will be repaid. Putting your home on the line is a good way to make sure you’ll do all you can to repay the loan. 

Secured loans are not just for new purchases. Secured loans can also be home equity loans or home equity lines of credit. The amount you can borrow is based on the current value of your home minus the amount still owed. These loans use your home as collateral.  

Some advantages of Secured Loans: 

• Lower Rates
• Higher Borrowing Limits
• Longer Repayment Terms

Most people know that we do auto loans, but we also offer both first mortgages and home equity lines of credit (HELOC). So, the next time you’re in the market for a new home or looking to refinance, check us out! 

Unsecured Loan 

Unsecured loans are the reverse of secured loans. They include things like credit cards, student loans, or personal loans. Because there is no asset to put up as collateral, lenders take more of a risk by making this loan and therefore charge higher interest rates. 

If you don’t have enough assets to use for a secured loan, you may still be able to borrow funds. An unsecured lender will judge you based on the five C’s of credit: 

• Character – can include credit score, employment history, and references
• Capacity – income and current debt
• Capital – money in savings or investment accounts
• Collateral – personal assets offered as collateral, like a home or car
• Conditions – the terms of the loan

IAA Credit Union offers both personal loans and a variety of credit card options to meet your needs.  

Making the Best Financial Decision 

Knowing how and when to borrow money can be a challenge! But with the different types of loans available at IAACU, we’ll have you covered when you need us.