Secured debts

Secured debts are often seen as “safer” due to lower interest rates, but they carry higher stakes—your home, car, or equity is on the line.

Responsible borrowing, extra payments, and strategic refinancing are the keys to minimizing long-term costs and avoiding serious consequences.

Mortgage Loans – Home Loans Backed by Property

What they are and why they're dangerous

A mortgage loan is used to purchase a home and is secured by the property itself. This means that if the borrower fails to make payments, the lender has the legal right to foreclose on the home and sell it to recover the remaining debt. Mortgages usually come in long terms, typically 15 to 30 years, and can have fixed or variable interest rates.

While mortgage loans offer relatively low interest compared to other forms of debt, they are risky because your home is on the line. Failure to pay on time—due to job loss, illness, or rising adjustable rates—can result in losing your home. Additionally, borrowers often underestimate the total cost of interest over decades, which can far exceed the original loan amount. If home values drop, owners may owe more than the house is worth—known as being "underwater."

How to pay it off fast:

 

  • Make biweekly payments instead of monthly; this adds one extra full payment per year and shortens the loan term.

  • Round up payments to the nearest hundred to reduce principal faster.

  • Apply windfalls (tax refunds, bonuses) directly to the principal.

  • Refinance to a shorter term or lower rate if financially feasible, being mindful of fees.

 

Auto Loans – Vehicle Loans with the Car as Collateral

What they are and why they're dangerous

Auto loans are used to finance vehicle purchases and are secured by the vehicle itself. If payments are missed, the lender can repossess the car without a court order. Loan terms typically range from 36 to 84 months.

Cars are rapidly depreciating assets. Borrowers often find themselves "upside down," meaning they owe more on the loan than the car is worth. Long loan terms reduce monthly payments but increase the total interest paid and the risk of negative equity. Repossession is swift and damaging to credit, leaving the borrower without transportation and still potentially owing a balance if the car sells for less than the loan balance.

How to pay it off fast:

 

  • Pay extra toward principal every month, even small amounts.

  • Avoid long-term loans; choose the shortest term manageable to reduce interest.

  • Make a larger down payment to minimize the loan amount and interest burden.

  • Refinance if your credit improves or interest rates drop.

 

Home Equity Loans & HELOCs – Loans Secured Against Home Equity

What they are and why they're dangerous

Home equity loans and HELOCs (Home Equity Lines of Credit) allow you to borrow against the value of your home beyond your primary mortgage. A home equity loan provides a lump sum with fixed payments, while a HELOC functions like a credit line with variable rates and a draw period.

These loans turn your equity—the portion of your home you “own”—into collateral. If you default, you risk foreclosure, just like with a mortgage. HELOCs are especially risky because they often come with variable interest rates, and the temptation to use them for non-essential expenses (like vacations or consumer goods) can lead to mounting, hard-to-manage debt.

How to pay it off fast:

 

  • Make interest and principal payments during the draw period (for HELOCs) to avoid ballooning debt later.

  • Avoid overborrowing; only use for necessary, high-return investments (e.g., home improvements).

  • Refinance into a fixed-rate loan if interest rates rise.

  • Use lump-sum payments from windfalls to reduce the principal quickly.