Canadian Loan Landscape Part 2: Secured Loans

Canadian Loan Landscape Part 2: Secured Loans

Written by Caitlin Wood
Last Updated June 2, 2021

The first part of our Canadian Loan Landscape blog series discussed unsecured loans across the country. Today we will discuss secured loans and the many options available to Canadians all across the credit score spectrum. First, let’s discuss why lenders are interested in security and the type of assets you can secure a loan.

Lenders love security primarily because it mitigates the risk of a loss. Be aware that in nearly all situations lenders are not interested in your asset, they simply want payments to be made on time. When a loan is secured against an asset and the borrower defaults, the lender has to spend on legal and sometimes transportation fees in order to aprehend the secured asset. The lender then has to find a buyer for said asset. This process is both costly and time consuming and that’s why it is left as an option of last resort, but note that it does occur so when you secure a loan against one of your assets, be sure you are ready to make the payments!

Now, the lender isn’t the only one that benefits with a secured loan. As a secured loan is less risky, they are also less expensive (i.e. lower interest rates). That’s why, for example, a first mortgage from a bank comes at a rate of 3-4%, and a credit card at 19% or more. Security is the key here, but the question is, what assets can you secure a loan against? Well, the most typical assets to secure a loan against are property and vehicles (cars, boats, trailers, campers etc), but you can also secure a loan against other valuable items as well. Let’s look at each one by one:

Home Loans

A loan secured against a home usually comes in the form of a mortgage but there are a few other products that deviate from the traditional mortgage as well. For example, you can obtain a home equity line of credit (also known as a HELOC) which in some ways works in a way similar to a credit card. In the case of home loans, it all goes down to home equity. If you are going for a first mortgage then it is likely that the loan you get is secured against the property you are purchasing. On the other hand, if you already own your home, you can obtain a loan against it (i.e. a HELOC or second mortgage). If you are in the middle of your mortgage then refinancing is another good option if you are in need of a large lump sum of cash.

Vehicle Loans

There are essentially two types of vehicle loans available: vehicle loans obtain directly via a dealership, bank or used car lot, or a title loan against a vehicle you already own. The reason we use the term “vehicle loan” as opposed to “car loan” is because cars are not the only vehicle you can secure assets against, other options include boats, motorcycles, trailers and other such assets. The process is more or less the same for all of these options.

A title loan works much like an unsecured loan, with the main differences being a that a title loan is cheaper and the lender takes title on your vehicle. This implies that if you default on your loan, your vehicle can be repossessed by the lender.

Collateral Loans (Pawn Loans)

The last option you have available in the secured loan landscape is a pawn or collateral loan. This works in a similar way to the loan types listed above. You can secure a loan against a valuable asset such as a diamond ring, collector’s item or basically anything you can pawn. All you have to do is ship your valuable item to the pawn shop lender and they can finance a loan for you secured against said item. This is a great option for individuals that wish to avoid an unsecured loan but don’t possess any vehicle or property with equity.

What about my credit score?

If your credit score is an issue, you still have options. Since these loans are all secured, risk is reduced and so your credit score becomes less of a factor for lenders to consider. In the case of home loans, many bad credit lending solutions exist and you can speak with a Loans Canada representative to learn more about them. As for car loans, title loans and/or pawn loans, the process is much easier and lenders are much more lenient even with those that have a weaker financial profile.

Rating of 5/5 based on 1 vote.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Save With Loans Canada

Special Offers

50 Free Trades Offer

50 Free Trades Offer
Ends August 31st, 2022

Almost $500 in commission-free trades. Code “50TRADESFREE”. Conditions apply.

View Offer
Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 1%² cashback guaranteed.

View Offer
Build Credit With Refresh

Build Credit With Refresh

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $7/Month

Build Credit For $7/Month

With KOHO’s prepaid card you can build a better credit score for just $7/month.

View Offer
Industry Spotlight

What's happening with Canada's credit industry?

addy ⎯ Making Real Estate Accessible To All Canadians

addy ⎯ Making Real Estate Accessible To All Canadians

Check out our interview with addy; a platform that allows Canadians to invest in different properties across Canada with as little as $1.

Read Post
Find The Best Rate
In Your Region
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.