If you are a borrower who is looking to receive aid to go to college, you might want to steer clear of a secured loan. The Federal Government does not require you to receive a secure loan through one of their programs, it’s strictly something that private lenders will do. So what is a secured loan and why do you want to avoid it? Take a look at some of the facts.
In order to receive a secured loan, you need to put up some sort of collateral. In most instances, people will use their vehicle or even their house for this. At that point, you are basically signing away your property.
If you default on a student loan through the Federal Government, the consequences are bad enough as it is. However, if you were to default on a secured loan, the consequences are even worse. Instead of losing a portion of your paycheck, they will take away what you used as collateral. If you used your home, then this will be extremely damaging to your quality of life.
At that point, your asset that you gave to the company will then be sold. If the money they received from the sale isn’t enough, then you will still have to owe them the remainder in the meantime.
A Lot to Lose
In cases of default for a Federal Government student loan, it will go to a collections agency. In the most extreme cases, they can take you to court to try to reclaim the money, but this is rare. In the event of a default on a secured loan, you have a lot more to lose. It’s another example of why you want to use Federal aid when it comes to paying for school if you do not have the necessary amount of money.
Make sure to always check back with us at Ameritech Financial for more and up to date information on student loans.
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