A secured line of credit is also known as a “piggyback loan” because you’re using something as collateral. This means that if you don’t pay the loan, the lender can repossess the collateral to make up for the losses. In this case, the lender will take some equity you have in an asset to give them “security.”
Generally, this type is much easier to qualify for because the lender has a form of security with which to back up the funds. This could be your car, your home, stocks and bonds, a certificate of deposit (CD), or some other valuable asset.
The benefits of a secured line of credit include:
- Lower interest rate
- Easier qualification requirements
- Collateral provides security for the lender