There are many types of secured loans for seniors. Some are more beneficial than others due to lower APRs and flexible repayment terms. Some secured loans require the borrowed funds to be used for specified purposes. Others allow the money to be used as desired. Examples of several types of secured loans for seniors include reverse mortgage loans, Home Equity Lines of Credit (HELOC), Title Loans and Savings Secured Loans.
Reverse mortgage loans are the most common type of secured loans offered to seniors. There are three types of reverse mortgage loans, usable for different purposes. These types of loan pay off a home mortgage based on the amount of equity in the home. They also provide tax-free funds to the borrower, which do not have to be paid back until the borrower moves out of the home or dies.
Reverse mortgage loans deplete all home equity and have high cumulative changing interest rates.
They also decrease assets available to leave for family inheritances. Reverse mortgage loans require one or more borrowers to be at least 62 years of age to qualify.
HELOC loans are positive alternatives to reverse mortgage loans. A HELOC is a revolving line of credit. Home equity is used as qualifying collateral. Interest rates for a HELOC are lower than for other types of secured loans. Because a HELOC is a revolving account, available credit increases as the balance is paid down. HELOC funds can therefore be used repeatedly, provided payments are made in good standing.
Seniors who own a car, boat or RV are able to use the associated titles as collateral. Funds for title loans are generally lower than those where home equity is provided as collateral. Title loans work in a tight situation when minimal to moderate debt must be paid quickly.
Savings secured loans are viable ways to secure a loan without losing the money in your savings account. Money in a savings or money market account is used as collateral up to the amount of funds being borrowed plus interest and fees.
Collateral funds are frequently frozen until the loan is paid off in full. They are alternatively frozen in decreasing amounts inversely proportional to the amount each monthly payment made. Savings secured loans often have extremely low interest rates and monthly payments, making them more affordable than many other secured loans.