When most of the cost of the item is paid for, the asset, known as the collateral, secures the remainder of the loan. If the monthly payments are not met on their predetermined timeline, the creditor then has the right to reclaim the collateral.
There are two types of secured credit available. With a secured, close-ended credit card, a set amount is borrowed up front, with the ability to borrow more from it at a later date. The balance is then repaid in equal amounts over a set period of time. An example of this would be a mortgage.
The other type is a secured open-ended credit card. This type of card sets a limit for its owner, with the ability to borrow repeatedly up until the set amount is hit. Borrowing is often available as long as the account itself is open. Minimum required payments vary based on the current amount owed at that specific time.
Depending on your projected purchase your decision on which card to use may change. If you’re unsure of where to begin in terms of choosing, consult a Bethpage expert today.
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