Secured Loan Definition

A secured loan is a type of borrowing where the borrower provides collateral to the lender to secure the loan. This collateral can be in the form of property, assets, or other valuables. If the borrower fails to repay the loan, the lender has the right to seize the collateral to recover the unpaid amount. Secured loans are typically considered less risky for lenders compared to unsecured loans because of this collateral backing. This reduced risk often allows lenders to offer lower interest rates and more favorable terms for secured loans. Secured loans can be used for a variety of purposes, including purchasing a home, financing a car, or consolidating debt. Common examples include mortgages, auto loans, and home equity lines of credit (HELOCs). The key features of a secured loan include the requirement of collateral, a clear repayment schedule, and the potential for the lender to claim the collateral if the borrower defaults. The terms and conditions of secured loans can vary depending on the type of loan, the value of the collateral, and the borrower's creditworthiness.