A consumer loan is money you borrow for personal use, not for a business. Common types include bank loans, auto loans, student loans, and home loans (mortgages).

Most consumer loans have a set monthly payment for a set period of time.

There are two main kinds of consumer loans: secured loans and unsecured loans.

Secured loans

A secured loan is backed by something you own, like a car or a house. 

If you stop paying on a secured loan, the lender can take the property used to secure the loan. 

• For houses, lenders have to follow special foreclosure rules.
• For cars and retail financing, lenders have to follow special repossession rules. 

They typically sell this property to recover the amount you owe on the loan. If there is still a balance after they sell the secured property, the lender may sue you.  

Unsecured loans

An unsecured loan is not backed by something you own. Bank loans, payday loans, and most student loans are unsecured.

If you stop paying, the lender may add late fees and extra interest to your next bill.  If you stop paying  for a few months, the lender may send your loan to collections or sell it to a debt buyer. The lender or debt buyer may sue you in court to recover the amount you owe. If they win a judgment, they may be able to take part of your wages, the money in your bank account, and put a lien on your house (if you own one) to recover what you owe.