Know what backs a secured loan
See which asset backs the loan and what your agreement says about missed payments.
Definition
A secured loan is backed by an asset, such as a car or home. That asset is called collateral.
How does a secured loan work?
With a car loan, the car backs the money you borrow. The lender has a legal claim to it. If you stop making payments, the lender may be able to take the car and sell it. This is called repossession. What the lender can do depends on your agreement and the law where you live. One missed payment does not always mean you lose the car.
What should you check?
Before you agree, find the asset named in the loan agreement. Read what it says about missed payments and when the lender may take the asset. If the asset is sold, you may still owe money. That depends on the loan and the law where you live.