Types of Credit
Secured Credit: With secured credit, an asset (or collateral) is required to secure the loan. The actual item is not held but the title to the item is usually retained by the lender. This enables the lender to assume limited risk – if you miss payments, the lender can collect against your collateral.
Secured, closed-end: This type of loan is most common for mortgage, auto and boat loans, as well as for other expensive items. The title of the property is held by the financial institution as security against the balance of the loan. The loan is repaid by installments over a period of time. As the balance of the loan goes down, there is no access to any more credit on that loan, and you must apply for another loan.
Secured, open-end: This is a type of revolving credit that is secured by an asset. Debts can be repaid in single, multiple, equal or unequal payment. Examples of this type of credit include home equity lines of credit and secured credit cards.