In this video, we explore secure debt, what it is, and why some they usually have lower interest rates.
What is Secured Debt?
Secured debt is any debt backed by collateral. This collateral lowers the risk for the lender, hence a (typically) lower initial interest rate. Common examples include a car loan where the vehicle is collateral, a mortgage where the home is collateral, and even secure personal loans where savings or property is collateral. Although interest rates are lower, the catch is that you could lose this collateral permanently if payment is not made in time.
