| Loans can be made for a variety of reasons, and the | | | | Sometimes loans that are intended to be used to |
| funds can be used for a variety of purposes. For | | | | finance such things as a family vacation can be |
| example, a person might make a loan to buy a car - | | | | secured. The vacation is not the pledged asset, but a |
| this would be a car loan - or a person might make a | | | | borrower can use other property as security for the |
| loan to buy a home - this would be a mortgage. Both | | | | loan, and the loan proceeds however he wishes. |
| car loans and mortgages are what are called | | | | The other type of loan is an unsecured loan. |
| "secured" loans. A secured loan is one of the two | | | | Unsecured loans are loans for which no tangible |
| basic types of loans; secured and unsecured. | | | | property has been pledged. Credit cards, gas cards, |
| A secured loan is one in which the borrower pledges | | | | store cards, medical bills, hospital bills and dental bills are |
| tangible property as security to the lender. In the case | | | | all types of unsecured loans. |
| of a car loan, the car is the tangible property. In the | | | | The law does not allow any recourse for the lender in |
| case of a mortgage, the home is the tangible property. | | | | the event that a borrower defaults on an unsecured |
| The law allows the lender to repossess tangible | | | | loan. The lender can't repossess anything because |
| property that was pledged as security for a secured | | | | there was nothing pledged as security. The lender can, |
| loan. The bank can repossess the car, and the | | | | however, make life unbearable. They can call, knock |
| mortgage company can foreclose on a home. | | | | on your door, and fill your mailboxes with second, third, |
| Secured loans can be sought for many purposes (to | | | | and final notices. |
| buy a house, a car, a boat, a motorcycle, etc.). | | | | |