A secured loan is a loan in which collateral e.g. a house or car is offered up to the creditor. In the event that the loan is defaulted on then the creditor can thereby take possession of the offered asset to satisfy the outstanding debt.
Secured loans can also be beneficial to the borrower. Unlike an unsecured loan the creditor will take into consideration the type and value of property offered as collateral. This may result in lower interest rates, larger sums of money that can be borrowed and longer time periods for repayment.
Examples of secured loans:
Mortgage is considered a secured loan because the home is offered as collateral.
Foreclosure is the legal process whereby the mortgaged property is sold and the debt repaid to the creditor.
Repossession is a process where the property e.g. a car, boat or motorcycle is taken back by the creditor to settle the outstanding debt.
